TEST BANK FOR CORPORATE FINANCE

TEST BANK FOR CORPORATE FINANCE

ACTUAL LATEST EXAM -

QUESTIONS AND WELL VERIFIED CORRECT

ANSWERS [ALREADY GRADED A+]

GURANTEED PASS!!!

Joe's has old, fully depreciated equipment. Moe's just purchased all new equipment which will be depreciated over eight years. If Joe's and Moe's have the same sales,

costs, tax rate, and enterprise value, then:

• Joe's will have a lower profit margin.
• Joe's will have a lower return on equity.
• Moe's will have a higher net income.
• Moe's and Joe's will have the same EV multiple.
• Moe's will have a lower EV multiple. - ANSWER-D

Last year, Alfred's Automotive had a price-earnings ratio of 15 and earnings per share of $1.20. This year, the price earnings ratio is 18 and the earnings per share is

$1.20. Based on this information, it can be stated with certainty that:

• the price per share decreased.
• the earnings per share decreased.
• investors are paying a lower price per share this year as compared to last year. 1 / 3

• investors are receiving a higher rate of return this year.
• the investors' outlook for the firm has improved. - ANSWER-E

Turner's Inc. has a price-earnings ratio of 16. Alfred's Co. has a price-earnings ratio

of 19. Thus, you can state with certainty that one share of stock in Alfred's:

• has a higher market price than one share of stock in Turner's.
• has a higher market price per dollar of earnings than does one share of Turner's.
• sells at a lower price per share than one share of Turner's.
• represents a larger percentage of firm ownership than does one share of Turner's

stock.

• earns a greater profit per share than does one share of Turner's stock. -

ANSWER-B

Which one of the following is most apt to cause a firm to have a higher price- earnings ratio?

• slow industry outlook
• very low current earnings
• low market share
• low prospect of firm growth
• low investor opinion of firm - ANSWER-B

Vinnie's Motors has a market-to-book ratio of 3.4. The book value per share is $34 and earnings per share are $1.36. Holding the market-to-book ratio and earnings

per share constant, a $1 increase in the book value per share will:

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• decrease the price-earnings ratio.
• decrease the EV multiple.
• decrease the market price per share.
• increase the price-earnings ratio.
• increase the return on equity. - ANSWER-D

Ratios that measure a firm's ability to pay its bills over the short run without undue

stress are known as:

• asset management ratios.
• long-term solvency measures.
• liquidity measures.
• profitability ratios.
• market value ratios. - ANSWER-C

Two Sisters Dresses has net working capital of $43,800, net fixed assets of $232,400, net income of $43,900, and current liabilities of $51,300. The tax rate is 35 percent and the profit margin is 9.3 percent. How many dollars’ worth of sales are generated from every $1 in total assets?

A. $1.44

B. $1.32

C. $1.73

D. $.97

E. $1.06 - ANSWER-A

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