Finals Manaco2

MANACO 2 Questions!!! THEORIES 1.In analyzing whether to build another regional service ofce, the salary o the Chie Executive Ofcer (CEO at the cor!orate head"uarters is a. #elevant elevant because because salarie salaries s are always always relevan relevant. t. b. #elevan elevantt becaus because e this this will will !roba !robabl bly y chang change e i the the regio regiona nall servic service e ofce ofce is build. c. Irrelevant Irrelevant because it is uture cost that will not di$er between the alternatives under consideratio consideration. n. d.Irreleva d. Irrelevant nt since another i%!uted costs or the sa%e will be considered. considered. &. If, just prior to a period of rising prices, a company changed its inventory

measurement method from FIFO to LIFO, the effect in the next period would be to a. Increase Increase both the current current ratio ratio and and inventory inventory turn-over  turn-over  b. ecrease ecrease both the current current ratio and inventory inventory turn-over  turn-over  c. Increase Increase the current ratio and decrease decrease inventory inventory turn-over  turn-over  d. ecreas ecrease e the current current ratio ratio and increa increase se inventory inventory turn-ove turn-over  r  !. If income tax considerations are ignored, how is straight line depreciation expense used in the following capital budgeting techni"ues# $ime-adjusted rate of return

%et present value

a. &xcluded

&xcluded

b. &xcluded

Included

c. Included

&xcluded

d. Included

Included

a re e%!loyed to control large scale !roects. )hey include all '. 'arious tools are o the ollowing exce!t* +. E#).

C. -tatistical !rocess !rocess control. control.

B. CPM.

D. Gantt charts.

5. +ll o the ollowing state%ents are correct exce!t*

a.  )he %atching o asset and liability %aturities is considered desirable because this strategy %ini%izes interest rate ris. b. /eault ris reers to the inability o the 0r% to !ay o$ its %aturing obligations. c. )he %atching o assets and liability %aturities lowers deault ris. d. +n increase in the !ayables deerral !eriod will lead to a reduction in the need to non s!ontaneous unding

PROBLEMS ;)) (uestions ) and * are based on the following data+ llo foundation, a tax exempt organiation, invested *//, /// in a five-year project at the beginning of )0x1. llo estimates that the annual cash savings from this project will amount to 21, ///. $he *//, /// of assets will be depreciated over their five-year life on the straight line basis. On investments of this type, llo3s desired rate of return is )*4.

). $he net present value of the project is a. !', !*1 b. !2, '// c. 0/, /// d. )*1, /// *. llo3s time-adjusted rate of return on this project is a. Less than )*4 b. Less than )'4, but more than )*4 c. Less than )24, but more than )'4 d. 5ore than )24 !. $he following information regarding inventory policy was assembled by the 676 8orporation. $he company uses a 1/-wee9 year in all calculations. :ales Order (uantity :afety :toc9s Lead $ime $he reorder point is a. !, !// units b. *, )// units c. )// units

)/, /// units per year   *, /// units ), !// units ' wee9s

d. ), !// units '. Fabella 8ompany budgeted sales on account of )*/, /// for 6uly, *)), /// for ugust and )0;, /// for :eptember. 8ollection experience indicates that 2/4 of the budgeted sales will be collected the amount after the sale, !24 the second month, and '4 will be uncollectible. $he cash receipts from accounts receivable that should be budgeted for :eptember would be a. )20, ;// b. )'ags 8orporation offer, icnic should a. >uy the freeable ice bag due to )1/, /// advantaged. b. roduce the freeable ice bag due to **1, /// advantaged. c. roduce the freeable ice bag due to *1, /// advantaged. d. >uy the freeable ice bag due to 1/, /// advantaged. 2. ?en Lumber 8ompany obtained short term ban9 loan for ), ///, ///.// at an annual interest rate of )*4. s a condition of the loan ?en is re"uired to maintain a compensating balance of *//, ///.// in its chec9ing account. $he chec9ing account earns interest at an annual rate of 24. ?en would otherwise maintain only )//, ///.// in its chec9ing account for transactional purposes. ?en3s effective interest cost of the loan is a. )*4

b. )'4 c. )!.1/4 d. )*.2

5. 7hat is the ex!ected !ro0t8 +. :=,222

?. :=,1>2 :=,6>2

C.

:=,;22 /.

3. @ow %uch would the co%!any be willing to !ay beore investing in the !roect to learn in advance which o the three scenarios (o!ti%istic, !essi%istic, or %ost liely would actually occur8 +. :2

?. :1>2

C.

:;22

/.

:>>2

12. Enert !nc."s current ca#ital structure is shown below. $his structure is o#timal and the com#an% wishes to maintain it.

/ebt

&>4

reerred e"uity

>4

Co%%on e"uity

A24

EnertBs %anage%ent is !lanning to build a :A> %illion acility that will be 0nanced according to this desired ca!ital structure. Currently, :1> %illion o cash is available or ca!ital ex!ansion. )he !ercentage o the :A> %illion that will co%e ro% a new issue o co%%on shares is +. >2.224.

?. >=.&>4.

C. A2.224.

/. >=.224.