1. The risk-free rate of return is 4% and the market risk premium is 8%. What is the expected rate of return on a stock with a beta of 1.28? A. 9.12% B. 10.24% C. 13.12% D. 14.24% E. 15.36% 2. The stock of Big Joe’s has a beta of 1.14 and an expected return of 11.6%. The risk-free rate of return is 4%. What is the expected return on the market? A. 7.60% B. 8.04% C. 9.33% D. 10.67% E. 12.16% 3. You have a $1,000 portfolio, which is invested in stocks A and B plus a risk-free asset. $400 is invested in stock A. Stock A has a beta of 1.3 and stock B has a beta of .7. How much needs to be invested in stock B if you want a portfolio beta of .90? A. $0 B. $268 C. $482 D. $543 E. $600 StarrKnight Corporation’s Balance Sheet and Income Statement as shown below: 4. StarrKnight Corporation’s accounts payable turnover for 2008 is (use average payables) ______. A. 7.75 B. 7.96 C. 8.94 D. 9.02 E. 10.39 5. StarrKnight Corporation’s accounts receivable turnover ratio for 2008 is (use average accounts receivable) _______. A. 2.88 B. 15.43 C. 21.35 D. 29.53 E. 34.58 6. The inventory turnover for the Lambkin Company was 8 times and its days’ sales in receivables were 55. The average payables deferral period (or turnover) was 7.5. What is the cash cycle for Lambkin given a 365-day year? A. 51.96 days B. 58.04 days C. 115.00 days D. 149.29 days E. 164.37 days 7. In a typical month, the Jeremy Corporation receives 80 checks totaling $156,000. There are delayed four days on average. What is the average daily float? A. $22,286 B. $20,800 C. $18,000 D. $20,129 E. 19,899 8. As of the beginning of the quarter, you have a cash balance of $250. During the quarter, you pay your suppliers $310. Your accounts receivable collections are $420. You also pay an interest payment of $30 and a tax bill of $180. In addition, you borrow $75. What is your cash balance at the end of the quarter? A. $225 B. $245 C. $255 D. $275 E. $285 9. Your firm has an average receipt size of $108. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 8,500 checks per day. The daily interest is .016 percent. If the bank charges a fee of $225 per day, should the lockbox project be accepted? What would be the net annual savings be if the service were adopted? A. $25,842.59 B. $18,200.21 C. $19,250.45 D. $24,915.15 E. $24,519.51 10. No More Pencils, Inc., disburses checks every two weeks that average $93,000 and take seven days to clear. How much interest can the company earn annually if it delays transfer of funds from an interest-bearing account that pays .015 percent per day for those seven days? Ignore the effects of compounding interest. A. $3,315.25 B. $2,958.58 C. $2,538.90 D. $2,852.12 E. $2,583.09 11. Cow Chips, Inc., a large fertilizer distributor based in California, is planning to use a lockbox system to speed up collections from its customers located on the East Coast. A Philadelphia-area bank will provide this service for an annual fee of $20,000 plus 10 percent per transaction. The estimated reduction in collection and processing time is one day. If the average customer payment in this region is $5,300, how many customers are needed, on average, each day to make the system profitable for Cow Chips? Treasury bills are currently yielding 5 percent per year. A. 87.87 B. 91.15 C. 83.25 D. 81.98 12. If 25% of the customers pay on day 10 and 75% pay on day 30, the average collection period is: A. 15 days. B. 20 days. C. 25 days. D. 30 days. E. 40 days. 13. Collegiate Tuxedo rents apparel throughout the year. They have experienced non-payment by about 15% of their customers with an average loss of $200. Collegiate wants to stem their losses by using an instant electronic credit check on the customer. These checks will cost them $7 on each of the 1,000 customers. The opportunity cost is 1.5% for the credit period. Should they pursue the credit check? A. No, because the $7000 cost is to…
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