# BUSINESS

42) Given the financial manager’s preference for faster receipt of cash flows,

A) a longer depreciable life is preferred to a shorter one.

B) a shorter depreciable life is preferred to a longer one.

C) the manager is not concerned with depreciable lives, because depreciation is a non-cash expense.

D) the manager is not concerned with depreciable lives, because once purchased, depreciation is considered a sunk cost.

43) A corporation sold a fixed asset for $100,000. This is

A) an investment cash flow and a source of funds.

B) an operating cash flow and a source of funds.

C) an operating cash flow and a use of funds.

D) an investment cash flow and a use of funds.

44) Pro forma statements are used for

A) cash budgeting.

B) credit analysis.

C) profit planning.

D) leverage analysis.

45) The future value of $100 received today and deposited at 6 percent for four years is

A) $126.

B) $ 79.

C) $124.

D) $116.

46) The present value of $100 to be received 10 years from today, assuming an opportunity cost of 9 percent, is

A) $236.

B) $699.

C) $ 42.

D) $ 75.

47) Bill plans to fund his individual retirement account (IRA) with the maximum contribution of $2,000 at the end of each year for the next 20 years. If Bill can earn 12 percent on his contributions, how much will he have at the end of the twentieth year?

A) $19,292

B) $14,938

C) $40,000

D) $144,104

48) The risk free rate of interest is equal to the sum of the real rate of interest plus an inflation risk premium.

A) True

B) False

49) The tax deductibility of interest lowers the cost of debt financing, thereby causing the cost of debt financing to be lower than the cost of equity financing.

A) True

B) False

50) If expected return is less than required return on an asset, rational investors will

A) buy the asset, which will drive the price up and cause expected return to reach the level of the required return.

B) sell the asset, which will drive the price down and cause the expected return to reach the level of the required return.

C) sell the asset, which will drive the price up and cause the expected return to reach the level of the required return.

D) buy the asset, since price is expected to increase.

51) Tangshan China Company’s stock is currently selling for $80.00 per share. The expected dividend one year from now is $4.00 and the required return is 13 percent. What is Tangshan’s dividend growth rate assuming that dividends are expected to grow at a constant rate forever?

A) 8%

B) 9%

C) 10%

D) 11%

42) Given the financial manager’s preference for faster receipt of cash flows,

A) a longer depreciable life is preferred to a shorter one.

B) a shorter depreciable life is preferred to a longer one.

C) the manager is not concerned with depreciable lives, because depreciation is a non-cash expense.

D) the manager is not concerned with depreciable lives, because once purchased, depreciation is considered a sunk cost.

43) A corporation sold a fixed asset for $100,000. This is

A) an investment cash flow and a source of funds.

B) an operating cash flow and a source of funds.

C) an operating cash flow and a use of funds.

D) an investment cash flow and a use of funds.

44) Pro forma statements are used for

A) cash budgeting.

B) credit analysis.

C) profit planning.

D) leverage analysis.

45) The future value of $100 received today and deposited at 6 percent for four years is

A) $126.

B) $ 79.

C) $124.

D) $116.

46) The present value of $100 to be received 10 years from today, assuming an opportunity cost of 9 percent, is

A) $236.

B) $699.

C) $ 42.

D) $ 75.

47) Bill plans to fund his individual retirement account (IRA) with the maximum contribution of $2,000 at the end of each year for the next 20 years. If Bill can earn 12 percent on his contributions, how much will he have at the end of the twentieth year?

A) $19,292

B) $14,938

C) $40,000

D) $144,104

48) The risk free rate of interest is equal to the sum of the real rate of interest plus an inflation risk premium.

A) True

B) False

49) The tax deductibility of interest lowers the cost of debt financing, thereby causing the cost of debt financing to be lower than the cost of equity financing.

A) True

B) False

50) If expected return is less than required return on an asset, rational investors will

A) buy the asset, which will drive the price up and cause expected return to reach the level of the required return.

B) sell the asset, which will drive the price down and cause the expected return to reach the level of the required return.

C) sell the asset, which will drive the price up and cause the expected return to reach the level of the required return.

D) buy the asset, since price is expected to increase.

51) Tangshan China Company’s stock is currently selling for $80.00 per share. The expected dividend one year from now is $4.00 and the required return is 13 percent. What is Tangshan’s dividend growth rate assuming that dividends are expected to grow at a constant rate forever?

A) 8%

B) 9%

C) 10%

D) 11%