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MID-TERM
BE 307 - MANAGERJAL FINANCE
AUGUST 6, 2014

NAME: {-&<:YbM
GRADE:

In eac, question, fill in the blank with the correct letter./Each problem is worth 5 points. 50
minutes is allocated to this part of the test.
1. Which of the following legal forms of organization is characterized by limited liability?

A. Sole proprietorship.
B. Partnership.
('.g)Corporation.
D. Professional partilership.

2. The Glass-Steagall Act __::C.==---------

A. allowed commercial and investment banks to engage in the same activities.

B. created the Securities Exchange Commission.
:>created the Federal Deposit Insurance program and separated the activities of commercial and
investment banks.
D. was intended to regulate the activities in the primary market.
3. The two basic measures of liquidity are __.,:Be;______

A. inventory turnover and current ratio.

@current ratio and quick ratio.
C. gross profit margin and ROE.
D. current ratio and total asset turnover.

4. All of the following are outflows of cash EXCEPT _B=----

A. an increase in inventory. o
('.]) a decrease in accounts receivable.\
C. an increase in accounts receivable.o
D. a decrease in notes payable.o

5. Cash flows that result from debt and equity financing transactions, including incwTence and
repayment of debt, cash inflows from the sale of stock,_.and cash outflows to pay cash dividends
or repurchase stock are called C,_

A. operating flows.
B. investment flows.
financing flows.
D. none of the above.

6. The time value concept/calculation used in amortizing a loan is _...::D

____
A. future value of a dollar.
B. future value of an annuity.
C. present value of a dollar.
@present value of an annuity.
7. __A_ yield cmve reflects higher expected future rates of interest.
@An upward-sloping
B. A flat
C. A downward-sloping
D. A linear
"

8. Shares of stock currently owned by the firm's shareholders are called

_...t,.BL---

A. authorized.
(]) issued.
.outstanding.
D. treasury shares.
9. Systematic risk is also refened to as ---=C....
=---A. diversifiable risk.
B. economic risk.
@nondiversifiable risk.
D. not relevant.
10. As the volume of financing increases, the costs of the various types of financing will
the firm's weighted average cost of capital.
'8,
A. increase, lowering
@)increase, raising
C. decrease, lowering
D. decrease, raising

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D. Ifcost ofgoods sold was $185,000 in 2014, the Days in Inventory ratio is 3)loScb_f,
3'7S
lC>.5
1. 49 days
'77 days
/
105 days
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4. not able to be determined

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A. Janice would like to send her parents on a cruise for their 25th wedding anniversary. She has
priced the cruise at $15,000 and she has 5 years to accumulate this money. How much must
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Janice deposit annually in an account paying 10 percent interest in order to have enough money

to send her parents on the cruise? 1-),:f-5]

S_':!.-lP----.i
l5 1ooo
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1. $1,862
lC>
/2:i$2,457
Y,$3,000
4. $2,233
12. Please answer each part:

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B. Jia bo1rnws $50,000 at 10 percent annually compounded interest to be repaid in four equal
annual installments. The actual end-of-year loan payment is LfyIS.113
1,.1, '(\!,. 'If;'/_--"

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I. $10,774
2 $12,500
3. $14,340
C)$15,773

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C. Ifa United States Savings bond can be purchased for $14.60 and has a maturity value at the
end of25 years of$100, what is the annual rate ofretum on the bond? 3) 7,
g%

78

1. 6 percent
2. 7 percent
d)s percent
4. 9 percent

15. Please answer each part:

A. A film has the balance sheet accounts, common stock, and paid-in capital in excess of par,
with values of $10,000 and $250,000, respectively. The film has 10,000 common shares
outstanding. Ifthe firm had a par value of$1, the stock originally sold for $ 2-. '- DC>

B. A firm has an issue of prefe1Ted stock outstanding that has a par value of $100 and a 4%
dividend. If the cmrent market price of the preferred stock is $50, the yield on the prefe rred stock
IS

8%

C. Julian is considering purchasing the stock of Pepsi Cola because he really loves the taste of
Pepsi. What should Julian be willing to pay for Pepsi today if it is xpected to pay a $2 dividepd
in one year and he expects dividends to grow at 5 percent indefinitely? Julian requires a 12
percent return to make this investment. $ '30. 00
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D. Tangshan China's stock is cmTently selling for $160.00 per share and the :firm's dividends
expected to grow at 5 percent indefinitely. Assuming Tangshan China's most recent dividend
was $5.50, what is the required rate ofretmn on Tangshan's stock?
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