Master in Business Administration

Corporate finance MCQs Second set for chapters 18-19-20-21-25-26

with problem short solutions

Download the attachments at the end

Sample qeustions:

52. R&S is considering either leasing or buying some new equipment. The lease payments would be $9,500 a year. The purchase price is $31,000. The equipment has a 3-year life after which it is expected to have a resale value of $4,500. Your firm uses straight-line depreciation, borrows money at 8.5 percent, and has a 35 percent tax rate. What is the aftertax salvage value of the equipment?

a. $2,857

B. $2,925

c. $3,333

d. $6,075

e. $6,923

After-tax salvage value = $4,500 * (1 - .35) = $2,925

62. Your supplier grants you credit terms of 2/10, net 35. What is the effective annual rate of the discount if you purchase $2,900 worth of merchandise?

a. 23.5 percent

b. 27.7 percent

c. 28.8 percent

d. 33.5 percent

E. 34.3 percent

Days in period = 35-10 = 25; Periods per year = 365 / 25 = 14.6;

Interest rate for 30 days = [.02*$2,900] / [(1-.02)*$2,900] = $58 / $2,842 = .02041;

Effective annual rate = (1 + .02041)^14.6 -1 = .3431 = 34.3 percent

Corporate Finance - MCQs Chapter 18-19-20-21-25-26

Download the files at the end of the article

Sample questions:

11) According to the text, the _____ is generally responsible for making credit policy decisions.

[A] production manager

[B] controller

[C] marketing manager

[D] cash manager

[E] payables manager

 [A] :This manager is generally responsible for setting production schedules and materials requirements. Review section 19.2.  

[B] :This manager performs more of an information and reconciliation function than an actual decision-making function. Review section 19.2.  

[C] :You are correct!  

[D] :This manager is generally responsible for the collection, concentration, and disbursement of cash in addition to managing short-term borrowing relationships. Review section 19.2.  

[E] :This manager generally deals with decisions concerning payment policies and taking discounts offered. Review section 19.2.

16) Jumbo, Inc. had sales of $8,000 in November, $14,000 in December, and projects sales of $10,000 in January, $12,000 in February, and $8,000 in March. The firm's COGS in any given month is equal to 70 percent of the next month's sales. The firm collects its receivables in 60 days and pays its payables in 30 days. The firm begins January 1 with $10,000 in cash. All sales and purchases are on credit. There are no other costs or revenues. What are Jumbo's total cash collections in March? Assume there are 30 days in every month.

[A] $10,000

[B] $11,000

[C] $11,600

[D] $12,100

[E] $13,000

 [A] :You are correct!