MANACO 2 Questions!!!
MANACO 2 Questions!!!
THEORIESTHEORIES
1.In analyzing whether to build another regional service ofce, the salary o the 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 Chie Executive Ofcer (CEO at the cor!orate head"uarters is a.
a. ##elevaelevant becant because saluse salariearies are alws are always reays relevanlevant.t. b.
b. ##eleelevanvant t becbecausause e thithis s wiwill ll !r!robaobablbly y chachangnge e i i ththe e reregiogionanal l serservicvice e ofcofce e isis build.
build. c.
c. IrrelevaIrrelevant because it nt because it is uture cost that is uture cost that will not di$er between will not di$er between the alternativesthe alternatives under
under consideratioconsideration.n. d.
d.IrrelevaIrrelevant nt since since another another i%!uted i%!uted costs costs or or the the sa%e sa%e will will be be considerconsidered.ed. &.
&. If, just prior to a period of rising prices, a company changed its inventoryIf, 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 measurement method from FIFO to LIFO, the effect in the next period would be to
a.
a. IncreasIncrease both e both the cuthe current rrrent ratio aatio and invnd inventory entory turn-ovturn-over er b.
b. ecreasecrease both e both the cuthe current rrent ratio ratio and iand inventory nventory turn-ovturn-over er c.
c. IncreasIncrease the e the current current ratio ratio and dand decrease ecrease inveninventory turtory turn-over n-over d.
d. ecreasecrease the cue the current rarrent ratio and tio and increaincrease invse inventory tuentory turn-overn-over r
!. If income tax considerations are ignored, how is straight line depreciation !. If income tax considerations are ignored, how is straight line depreciation expense used in the following capital budgeting techni"ues#
expense used in the following capital budgeting techni"ues# $
$iimmee--aaddjjuusstteed d rraatte e oof f rreettuurrnn %%eet t pprreesseennt t vvaalluuee a
a.. &&xxcclluuddeedd &&xxcclluuddeedd b
b.. &&xxcclluuddeedd IInncclluuddeedd c
c.. IInncclluuddeedd &&xxcclluuddeedd d
d.. IInncclluuddeedd IInncclluuddeedd '.
'. ''arious tools aarious tools are e%!loyed to control large scale re e%!loyed to control large scale !roects. )hey include all!roects. )hey include all o the
o the ollowing exce!t*ollowing exce!t* +. E#).
+. E#). C. C. -tatistical !r-tatistical !rocess controcess control.ol. B.
B. CPM. CPM. D. D. Gantt Gantt charts.charts.
5.
a. )he %atching o asset and liability %aturities is considered desirable because this strategy %ini%izes interest rate ris.
b. /eault ris reers to the inability o the 0r% to !ay o$ its %aturing obligations.
c. )he %atching o assets and liability %aturities lowers deault ris.
d. +n increase in the !ayables deerral !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 organiation, 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 )/, /// units per year Order (uantity *, /// units
:afety :toc9s ), !// units
Lead $ime ' wee9s
$he reorder point is a. !, !// units b. *, )// units c. )// units
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. )'<, 02/ c. )0<, ;;/ d. )0', <2/
1. icnic Items, Inc. manufactures coolers that contain a freeable ice bag. For an annual volume of )/, /// units, fixed manufacturing costs of 1//, /// are
incurred. =ariable costs per unit amounts are+
irect materials ;/
irect Labor )1
=ariable Factory Overhead */
>ags 8orporation offered to supply the assembled ice bag for '/ with a
minimum order of 1, /// units. If picnic accepts the offer it will be able to reduce variable labor and overhead costs by 1/4. $he direct materials for the freeable ice bag will cost icnic */ if it will produce it. 8onsidering >ags 8orporation offer, icnic should
a. >uy the freeable ice bag due to )1/, /// advantaged. b. roduce the freeable ice bag due to **1, /// advantaged. c. roduce the freeable ice bag due to *1, /// advantaged. d. >uy the freeable 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
b. )'4 c. )!.1/4 d. )*.2<4
<. + 0r% %aintains a debte"uity ratio o 1.2. )he debt consists o bonds with a beore tax cost o 34. )he e"uity consists o ordinary shares with a cost o 154. )he %arginal cor!orate tax rate is 624. 7hat is the weighted average cost o
ca!ital8 a . 8.1% b . 9.9% c. 10.8% d . 11.7%
Questions 8 and 9 are based on the following information.
+ co%!any has the ollowing !robabilities o !ro0t (or loss ro% an invest%ent o!!ortunity*
ro0t Outloo ro0t (9oss +%ount
robability
O!ti%istic :12,222 .;2 <ost liely =,222 .>> essi%istic (1,222 .1>
5. 7hat is the ex!ected !ro0t8
+. :=,222 ?. :=,1>2 C. :=,;22 /. :=,6>2
3. @ow %uch would the co%!any be willing to !ay beore investing in the !roect to learn in advance which o the three scenarios (o!ti%istic, !essi%istic, or %ost liely 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 reerred 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
