22. Next year Jenkins Traders will pay a dividend of $3.00. It expects to increase its dividend by $0.25 in each of the following three years. If their required rate of return if 14 percent, what is the present value of their dividends over the next four years?

$12.50

$13.50

$11.63

$9.72

23. Firms that achieve higher growth rates without seeking external financing:

Have a low plowback ratio

are highly leveraged

have less equity and/or are able to generate high net income leading to a high ROE.

None of these

24. Which of the following presents a summary of changes in a firm’s balance sheet from the beginning of an accounting period to the end of that accounting period?

the statement of net worth

the statement of cash flows

the statement of retained earnings

the statement of working capital

25. External financing needed: Jockey Company has total assets worth $4,417,665. At year-end it will have net income of $2,771,342 and pay out 60 percent as dividends. If the firm wants no external financing, what is the growth rate it can support?

25.1%

30.3%

27.3%

32.9%

26. In a process cost system, product costs are summarized:

on production cost reports.

on job cost sheets.

after each unit is produced.

when the products are sold.

27. When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using:

product costing

variable costing

operations costing

absorption costing

28. Internal reports that review the actual impact of decisions are prepared by:

management accountants

department heads

the controller

factory workers

29. Process costing is used when:

the production process is continuous.

production is aimed at fulfilling a specific customer order.

dissimilar products are involved

costs are to be assigned to specific jobs.

30. M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is expected to exist forever. The company is currently financed with 75 percent equity and 25 percent debt. Your analysis tells you that the appropriate discount rates are 10 percent for the cash flows, and 7 percent for the debt. You currently own 10 percent of the stock.

If Dynamo wishes to change its capital structure from 75 percent equity to 60 percent equity and use the debt proceeds to pay a special dividend to shareholders, how much debt should they use?

$225

$600

$321

$375

31. TuleTime Comics is considering a new show that will generate annual cash flows of $100,000 into the infinite future. If the initial outlay for such a production is $1,500,000 and the appropriate discount rate is 6 percent for the cash flows, then what is the profitability index for the project?

0.90

0.11

1.11

1.90

32. Jack Robbins is saving for a new car. He needs to have $21,000 for the car in three years. How much will he have to invest today in an account paying 8 percent annually to achieve his target? (Round to nearest dollar)

$22,680

$26,454

$19,444

$16,670

33. The most important information needed to determine if companies can pay their current obligations is the:

relationship between current assets and current liabilities

relationship between short-term and long-term liabilities

projected net income for next year

net income for this year

34. Ajax Corp. is expecting the following cash flows – $79,000, $112,000, $164,000, $84,000, and $242,000 – over the next five years. If the company’s opportunity cost is 15 percent, what is the present value of these cash flows? (Round to the nearest dollar.)

$414,322

$429,560

$480,906

$477,235

35. Your firm has an equity multiplier of 2.47. What is the debt-to-equity ratio?

0

1.74

0.60

1.47

36. If a company’s weighted average cost of capital is less than the required return on equity, then the firm:

partnership

is financed with more than 50% debt

has debt in its capital structure

is perceived to be safe

37. What decision criteria should managers use in selecting projects when there is not enough capital to invest in all available positive NPV projects?

the profitability index

the modified internal rate of return

the internal rate of return

the discounted payback