Using the ABC theory of behavior 3-4 reasons why drivers frequently exceed posted speed limits. How could we use the theory to decrease speeding? Be specific, and provide examples in your discussion.

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Sep
Categories: General Questions

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25

Sep
Categories: General Questions

Comments Off on Administrators of ambulatory care centers sit in a unique position. These administrators are responsible for day-to-day operations of

Administrators of ambulatory care centers sit in a unique position. These administrators are responsible for day-to-day operations of the facility while physicians are responsible for quality medical care. Some ambulatory care centers are owned by the physicians who practice in the center. In these types of organizations, the administrator is actually an employee of the physicians. In other settings, the ambulatory care center is owned by an investor group or corporate owner. In these instances, the physicians may be employees or independent contractors. Physician – administrator relationships are important to operating sound business structures.

Consider the following case:

Dr Case is a busy orthopedic surgeon with surgeries scheduled three mornings each week at an ambulatory care center. In addition, he provides consult visits in the afternoons of these three days. Dr Case is grumbling, he feels that he should be paid more than other partners in the practice as he is bringing in higher paying customers and providing more billable services per hour than most other physicians. Further, he feels it is unfair to have pay overhead expenses for the two days he is not in the clinic. He feels the overhead expenses should be based on the days that a physician is in the center and not based on the number of current partners.

1. Assuming the role of the administrator, how would you approach the problems in this case study.

2. What would you do for resolution.

25

Sep
Categories: General Questions

Comments Off on Discuss follow-up strategies for after an interview:

Discuss follow-up strategies for after an interview:

1. How to follow-up.

2. Time frame that is best to follow-up within.

3. What to do if you don’t hear anything back in a reasonable amount of time.

25

Sep
Categories: General Questions

Comments Off on What are the major valuation methods for financial assets?

1. What are the major valuation methods for financial assets? What projection should you make and what variables should you estimate? Please discuss the general valuation process

2. What was the true cause of the worst financial crisis the world has seen since the Great Depression? Please provide an analysis of the factors that fueled the worldwide financial meltdown and your personal view on the lessons we should have learnt from the crisis.

3. Hedge fund industry has grown rapidly in the past decade in the US. Please discuss the differences between hedge fund and mutual fund in term of fund structure, investment strategy and risk exposure.

4. What is PE ratio? What is the relationship between PE ratio and the growth rate, cost of capital, risk and the valuation of a Corporation?

5. Please discuss CAPM and WACC, including their assumptions, calculation methods and areas of applications. What problems should we pay attentions to in real application?

6. What are the basic steps in a merger and acquisition transaction? What are the key issues the management should focus on in the M&A process? Please discuss.

25

Sep
Categories: General Questions

Comments Off on First, define what a capital asset is.

First, define what a capital asset is. How is it defined in the code?

You Decide: Tax Capital Gains?

25

Sep
Categories: General Questions

Comments Off on For a portfolio of two stocks, Stock A has an expected return

2. For a portfolio of two stocks, Stock A has an expected return of 11.72% and Stock B has an expected return of 16.52%. Funds are allocated with 75% in Stock A and 25% in Stock B. What is the portfolio expected return?

a. 10.95%

b. 12.92%

c. 11.59%

d. 9.94%

3. Use the Capital Asset Pricing Model to find the required return on the market. Spry stock has a beta of 1.11. The risk-free rate is 4.28% and the expected return on Spry is 21.32%.

a. 20.94%

b. 19.63%

c. 21.13%

d. 18.37%

4. Miller Corporation had 2010 sales of $6,000,000. Its net profit margin was 6%. If paid out 35% of net income in dividends. What was the change in its retained earnings from the beginning of 2010 to the end of 2010?

a. $0

b. $234,000

c. $360,000

d. $126,000

5. ACME Co has a debt ratio, also known as the debt to total assets ratio, of 60%. What is the debt to equity ratio?

a. 50%

b. 200%

c. 300%

d. 100%

e. 150%

6. A portion of a firm’s balance sheet is shown below:

common stock ($4 par; 100 shares issued): $400

capital in excess of par: $100

retained earnings: $200

What was the market price per share of the stock when it was originally sold?

a. $4

b. $5

c. $6

d. $7

e. $8

7. Last year RetroGrade, Inc. had an operating profit of $600,000, paid $50,000 in interest expense. The applicable income tax rate for the year was 34%. The company had 100,000 shares of common stock outstanding at the end of last year. What was RetroGrade’s EPS last year?

a. $6.00

b. $3.76

c. $3.85

d. $3.63

8. You are given: Return on Assets = 12%; Total Asset Turnover = 4.0. Compute Net Profit Margin:

a. 9%

b. 15%

c. 12%

d. 3%

e. 6%

9. You have invested 40% of your money in Stock X, 31% in Stock Y, and the rest in Stock Z. The portfolio beta is 0.764, and the betas of Y and Z are -0.048 and 1.234 respectively. What is the beta of Stock X?

a. 1.052

b. 1.130

c. 1.201

d. .9981

10. Currently XYZ Company has a required return of 15% and a beta of 1.09. According to the CAPM, XYZ is:

a. less risky than the market

b. more risky than the market

c. has an equal risk to the market

d. can’t be compared to the market since the risk free rate is not known

11. Gallagher Corporation has a net profit margin of 12%. It has a total asset turnover ratio of 2X. The debt to total assets ratio is 50%. What is the return on equity ratio?

a. 8%

b. 32%

c. 48%

d. cannot be determined from the given information

12. Given the following information:

net income = $80,000,

beginning of year retained earnings = $20,000

end of year retained earnings = $70,000

Compute the amount of common stock dividends paid for the year.

a. $40,000

b. $30,000

c. $60,000

d. $50,000

e. $20,000

13. If the real rate of interest is 2%, inflation is expected to be 3% during the coming year, and the default risk premium, liquidity risk premium, and maturity premium for RealCo are all 1% each, what would be the yield on a RealCo bond?

a. 8%

b. 3%

c. 6%

d. 5%

14. Goodwill Manufacturing, a profit-making company, purchased a process line for $125,000 and spent another $23,000 on its installation. The line was commissioned in January 2009 and it falls into MACRS seven-year class life. Applicable income tax rate for Goodwill Manufacturing is 31% and there is no investment tax credit. Calculate the first year’s depreciation expense for this process line if the first year’s depreciation percentage is .143.

a. $20,178

b. $21,164

c. $32,254

d. $36,245

15. Kerney’s EBT is $74,500. What is the marginal tax rate?

a. 34%

b. 35%

c. 25%

d. 39%

16. Kerney’s EBT is $10,120,000. What is the average tax rate?

a. 39%

b. 24%

c. 18%

d. 34%

17. If Acme Corporation issues 1,000,000 shares of common stock at a $1/share par value, and if the market price of that stock at the time of issue is $9/share, then the value of Capital in Excess of Par in the equity section of the balance sheet is:

a. $1,000,000

b. $7,000,000

c. $0

d. $8,000,000

18. Suppose there is a two-stock portfolio consisting of Stock A and Stock B. The correlation coefficient of the returns of Stock A relative to the returns of Stock B is +1. The standard deviation of Stock A is 5%. The standard deviation of Stock B is 10%. The weight of Stock A is .5 and the weight of Stock B is .5 in the portfolio. What is the standard deviation of the portfolio?

a. 7.5%

b. 4.7%

c. 3.9%

d. 5.1%

e. 6.4%

19. Below are quotes from four different Nasdaq dealers for Taggart Co. common stock. Which dealer has the best quote if you were looking to buy this stock?

a. Dealer A bid $82.35 ask $82.70

b. Dealer B bid $82.40 ask $82.55

c. Dealer C bid $82.50 ask $82.65

d. Dealer D bid $82.75 ask $82.80

20. Acme Company has 2011 net income of $2 million. Its end of 2010 retained earnings figure was $30 million. If the company pays $5 million in cash dividends to its common stockholders in 2011, what will be the amount of retained earnings it has at the end of 2011?

a. $25 million

b. $27 million

c. $35 million

d. $32 million

21. Gallagher Corporation has a return on equity ratio of 30%. Its net profit margin is 6%. Its total asset turnover ratio is 10x. Its sales are $16 million. What is the amount of equity the company has on its balance sheet?

a. $4,800,000

b. $2,400,000

c. $1,600,000

d. $3,200,000

25

Sep
Categories: General Questions

Comments Off on Taggart Inc.’s stock has a 50% chance of producing a 25% return

1. Taggart Inc.’s stock has a 50% chance of producing a 25% return, a 30% chance of producing a 10% return, and a 20% chance of producing a -28% return. What is the firm’s expected rate of return?

a. 9.41%

b. 9.65%

c. 9.90%

d. 10 .15%

e. 10.40%

2. Cheng Inc. is considering a capital budgeting project that has an expected return of 25% and a standard deviation of 30%. What is the project’s coefficient of variation?

a. 1.20

b. 1.26

c. 1.32

d. 1.39

e. 1.46

3. Tom O’Brien has a 2-stock portfolio with a total value of $100,000. $37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his portfolio’s beta?

a. 1.17

b. 1.23

c. 1.29

d. 1.35

e. 1.42

4. Cooley Company’s stock has a beta of 1.40, the risk-free rate is 4.25%, and the market risk premium is 5.50%. What is the firm’s required rate of return?

a. 11 .36%

b. 11.65%

c. 11.95%

d. 12.25%

e. 12. 55 %

5. A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock’s current price?

a. $17.39

b. $17.84

c. $18.29

d. $18.75

e. $19.22

6. If D1 = $1.25, g (which is constant ) = 4.7%, and P0 = $26.00, what is the stock’s expected dividend yield for the coming year?

a. 4.12%

b. 4.34%

c. 4.57%

d. 4.81%

e. 5.05%

7. If D0 = $1.75, g (which is constant) = 3.6%, and P0 = $32.00, what is the stock’s expected total return for the coming year?

a. 8.37%

b. 8.59%

c. 8.81%

d. 9.03%

e. 9.27%

8. Whited Inc.’s stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 4.75% per year. The required rate of return on the stock, rs, is 11.50%. What is the stock’s expected price 5 years from now?

a. $40.17

b. $41.20

c. $42.26

d. $43.34

e. $44.46

9. Bosio Inc.’s perpetual preferred stock sells for $97.50 per share, and it pays an $8.50 annual dividend . If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company’s cost of preferred stock for use in calculating the WACC?

a. 8.72%

b. 9.08%

c. 9.44%

d. 9.82%

e. 10.22%

10. O’Brien Inc. has the following data: rRF = 5.00%; RPM = 6.00%; and b = 1.05. What is the firm’s cost of equity from retained earnings based on the CAPM?

a. 11.30%

b. 11.64%

c. 11.99%

d. 12.35% e. 12.72%

11. Assume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = $0.67; P0 = $27.50; and g = 8.00% (constant). What is the cost of equity from retained earnings based on the DCF approach?

a. 9.42%

b. 9.91%

c. 10.44%

d. 10.96%

e. 11.51%

12. You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after -tax cost of debt is 6.00%, the cost of preferred is 7.50%, and the cost of retained earnings is 12.75%. The firm will not be issuing any new stock. What is its WACC?

a. 8.98%

b. 9.26%

c. 9.54%

d. 9.83%

e. 10.12%

13. Anderson Systems is considering a project that has the following cash flow and WACC data. What is the project’s NPV? Note that if a project’s projected NPV is negative, it should be rejected.

WACC: 9.00%

Year 0 1 2 3

Cash flows -$1,000 $500 $500 $500

a. $265.65

b. $278.93

c. $292.88

d. $307.52

e. $322.90

14. Simms Corp. is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s projected IRR can be less than the WACC or negative, in both cases it will be rejected.

Year 0 1 2 3

Cash flows -$1,000 $425 $425 $425

a. 12.55%

b. 13.21%

c. 13.87%

d. 14.56%

e. 15.29%

15. Taggart Inc. is considering a project that has the following cash flow data. What is the project’s payback?

Year 0 1 2 3

Cash flows -$1,150 $500 $500 $500

a. 1.86 years

b. 2.07 years

c. 2.30 years

d. 2.53 years

e. 2.78 years

16. Susmel Inc. is considering a project that has the following cash flow data. What is the project’s payback?

Year 0 1 2 3

Cash flows -$500 $150 $200 $300

a. 2.03 years

b. 2.25 years

c. 2.50 years

d. 2.75 years

e. 3.03 years

17. As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow?

Sales revenues $13,000

Depreciation $4,000

Other operating costs $6,000

Tax rate 35.0%

a. $5,950

b. $6,099

c. $6,251

d. $6,407

e. $6,568

18. Fool Proof Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 33%, 45%, 15%, and 7% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project’s 10-year expected life. What is the Year 1 cash flow?

Equipment cost (depreciable basis) $65,000

Sales revenues, each year $60,000

Operating costs (excl. deprec.) $25,000

Tax rate 35.0%

a. $30,258

b. $31,770

c. $33,359

d. $35,027

e. $36,778

19. Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s 3-year life. What is the project’s NPV?

Risk-adjusted WACC 10.0%

Net investment cost (depreciable basis) $65,000

Straight-line deprec. rate 33.3333%

Sales revenues, each year $65,500

Operating costs (excl. deprec.), each year $25,000

Tax rate 35.0%

a. $15,740

b. $16,569

c. $17,441

d. $18,359

e. $19,325

20. Liberty Services is now at the end of the final year of a project. The equipment originally cost $22,500, of which 75% has been depreciated. The firm can sell the used equipment today for $6,000, and its tax rate is 40%. What is the equipment’s after-tax salvage value for use in a capital budgeting analysis? Note that if the equipment’s final market value is less than its book value, the firm will receive a tax credit as a result of the sale.

a. $5,558

b. $5,850

c. $6,143

d. $6,450

e. $6,772

21. Chrustuba Inc. is evaluating a new project that would cost $9 million at t = 0. There is a 50% chance that the project would be highly successful and generate annual after-tax cash flows of $6 million during Years 1, 2, and 3. However, there is a 50% chance that it would be less successful and would generate only $1 million for each of the 3 years. If the project is highly successful, it would open the door for another investment of $10 million at the end of Year 2, and this new investment could be sold for $20 million at the end of Year 3. Assuming a WACC of 10.0%, what is the project’s expected NPV (in thousands) after taking this growth option into account?

a. $2,776

b. $3,085

c. $3,393

d. $3,733

e. $4,106

22. Lindley Corp. is considering a new product that would require an investment of $10 million now, at t = 0. If the new product is well received, then the project would produce after-tax cash flows of $5 million at the end of each of the next 3 years (t = 1, 2, 3), but if the market did not like the product, then the cash flows would be only $2 million per year. There is a 50% probability that the market will be good. The firm could delay the project for a year while it conducts a test to determine if demand is likely to be strong or weak. The project’s cost and expected annual cash flows would be the same whether the project is delayed or not. The project’s WACC is 10.0%. What is the value (in thousands) of the project after considering the investment timing option?

a. $726

b. $807

c. $896

d. $996

e. $1,106

23. Longstreet Inc. has fixed operating costs of $470,000, variable costs of $2.80 per unit produced, and its product sells for $4.00 per unit. What is the company’s breakeven point, i.e., at what unit sales volume would income equal costs?

a. 391,667

b. 411,250

c. 431,813

d. 453,403

e. 476,073

24. Southwest U’s campus book store sells course packs for $16 each. The variable cost per pack is $10, and at current annual sales of 50,000 packs, the store earns $75,000 before taxes on course packs. How much are the fixed costs of producing the course packs?

a. $164,025

b. $182,250

c. $202,500

d. $225,000

e. $247,500

25. Senate Inc. is considering two alternative methods for producing playing cards. Method 1 involves using a machine with a fixed cost (mainly depreciation) of $12,000 and variable costs of $1.00 per deck of cards. Method 2 would use a less expensive machine with a fixed cost of only $5,000, but it would require a variable cost of $1.50 per deck. The sale price per deck would be the same under each method. At what unit output level would the two methods provide the same operating income (EBIT)?

a. 12,600

b. 14,000

c. 15,400

d. 16,940

e. 18,634

26. A group of venture investors is considering putting money into Lemma Books, which wants to produce a new reader for electronic books. The variable cost per unit is estimated at $250, the sales price would be set at twice the VC/unit, or $500, and fixed costs are estimated at $750,000. The investors will put up the funds if the project is likely to have an operating income of $500,000 or more. What sales volume would be required in order to meet the minimum profit goal? (Hint: Use the breakeven formula, but include the required profit in the numerator.)

a. 4,513

b. 4,750

c. 5,000

d. 5,250

e. 5,513

27. Becker Financial recently declared a 2-for-1 stock split. Prior to the split, the stock sold for $80 per share. If the firm’s total market value is unchanged by the split, what will the stock price be following the split?

a. $36.10

b. $38.00

c. $40.00

d. $42.00

e. $44.10

28. Fauver Industries plans to have a capital budget of $650,000. It wants to maintain a target capital structure of 40% debt and 60% equity, and it also wants to pay a dividend of $225,000. If the company follows the residual dividend policy, how much net income must it earn to meet its investment requirements, pay the dividend, and keep the capital structure in balance?

a. $584,250

b. $615,000

c. $645,750

d. $678,038

e. $711,939

29. Mid-State BankCorp recently declared a 7-for-2 stock split. Prior to the split, the stock sold for $80 per share. If the firm’s total market value is unchanged by the split, what will the stock price be following the split?

a. $20.63

b. $21.71

c. $22.86

d. $24.00

e. $25.20

30. D. Paul Inc. forecasts a capital budget of $725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and she also wants to pay a dividend of $500,000. If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be?

a. $898,750; 55.63%

b. $943,688; 58.41%

c. $990,872; 61.34%

d. $1,040,415; 64.40%

e. $1,092,436; 67.62%