Enter your Name on the top of the sheet for appropriate credit. Provide answers in TAB “Answer Sheet” Show detail work for each problem in TAB “Problem Worksheet”

1. A firm has a debt-equity ratio of .40. What is the total debt ratio?

A. .29

B. .33

C. .67

D. 1.40

E. 1.50

2. The percentage of sales method:

A. requires that all accounts grow at the same rate.

B. separates accounts that vary with sales and those that do not vary with sales.

C. allows the analyst to calculate how much financing the firm will need to support the predicted sales level.

D. Both A and B.

E. Both B and C.

3. Le Place has sales of $439,000, depreciation of $32,000, and net working capital of $56,000. The firm has a tax rate of 34% and a profit margin of 6%. The firm has no interest expense. What is the amount of the operating cash flow?

A. $49,384

B. $52,616

C. $54,980

D. $58,340

E. $114,340

4. You buy an annuity which will pay you $12,000 a year for ten years. The payments are paid on the first day of each year. What is the value of this annuity today at a 7% discount rate?

A. $84,282.98

B. $87,138.04

C. $90,182.79

D. $96,191.91

E. $116,916.21

5. Based on the profitability index (PI) rule, should a project with the following cash flows be accepted if the discount rate is 8%? Why or why not?

A. yes; because the PI is 1.008.

B. yes; because the PI is .992.

C. yes; because the PI is .999.

D. no; because the PI is 1.008.

E. no; because the PI is .992.

6. A project will produce an operating cash flow of $7,300 a year for three years. The initial cash investment in the project will be $11,600. The net after-tax salvage value is estimated at $3,500 and will be received during the last year of the project’s life. What is the net present value of the project if the required rate of return is 11%?

A. $8,798.29

B. $9,896.87

C. $10,072.72

D. $13,353.41

E. $20,398.29

7. A project has earnings before interest and taxes of $5,750, fixed costs of $50,000, a selling price of $13 a unit, and a sales quantity of 11,500 units. Depreciation is $7,500. What is the variable cost per unit?

A. $6.75

B. $7.00

C. $7.25

D. $7.50

E. $7.75

8. A project has a contribution margin of $5, projected fixed costs of $12,000, a projected variable cost per unit of $12, and a projected present value break-even point of 5,000 units. What is the operating cash flow at this level of output?

A. $1,000

B. $12,000

C. $13,000

D. $68,000

E. $73,000

9. The relationship between nominal rates, real rates, and inflation is known as the:

A. Miller and Modigliani theorem.

B. Fisher effect.

C. Gordon growth model.

D. term structure of interest rates.

E. interest rate risk premium.

10. Party Time, Inc. has a 6% coupon bond that matures in 11 years. The bond pays interest semiannually. What is the market price of a $1,000 face value bond if the yield to maturity is 12.9%?

A. $434.59

B. $580.86

C. $600.34

D. $605.92

E. $947.87