IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 991:

  Which of the following is a market-oriented definition of a business versus a product- oriented definition of a business?

  A. We make air conditioners and furnaces
  B. We supply energy
  C. We produce movies
  D. We sell men's shirts and pants
  B. We supply energy

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  Explanation

  Business should be defined in market terms, that is, in terms of needs and customer groups. Moreover, a distinction should be made between a target market definition and as strategic market definitions. For example, a target market for a railroad might be freight hauling, but a strategic market might be transportation of any goods and people . Accordingly, stating that a business supplies energy is a market-oriented definition as opposed to the product-oriented definition. Moreover, it is also a strategic market definition.

• Question 992:

  By using the dividend growth model, estimate the cost of equity capital for a firm with a stock price of $30 00, an estimated dividend at the end of the first year of $300 per share, and an expected growth rate of 10%.

  A. 21.1%
  B. 122%
  C. 110%
  D. 200%
  D. 200%

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  Explanation

  Under the dividend growth model, the cost of equity equals the expected growth rate plus the quotient of the next dividend and the current market price. Thus the cost of equity capital is 20% [10% + ($3 + 11$30)].This model assumes that the payout ratio, retention rate, and the earnings per share growth rate are all constant.

• Question 993:

  Hermo Company has just completed a hydro-electric plant at a cost of $21,000,000. The plant will provide the company's power needs for the next 20 years. Hermo will use only 60% of the power output annually. At this level of capacity', Hermo's annual operating costs will amount to $1,800,000, of which 80% are fixed. Quigley Company currently purchases its power from MP Electric at an annual cost of $1,200,000. Hermo could supply this power, thus increasing output of the plant to 90% of capacity'. This would reduce the estimated life of the plant to 14 years. The maximum amount Quigley would be willing to pay Hermo annually for the power is

  A. $600,000
  B. $1,050,000
  C. $1,200,000
  D. Some amount other than those given.
  C. $1,200,000

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  Explanation

  Since Quigley is currently paying $1,200,000, it would not want to pay any more for the same service.

• Question 994:

  Which of the following is the major difference between the capital asset pricing model (CAPM) and arbitrage pricing theory (APT)?

  A. CAPM uses discounted cash flows whereas APT does not.
  B. CAPM uses a single systematic risk factor to explain an asset's return whereas APT uses multiple systematic factors.
  C. APT uses a single systematic risk factor to explain an asset's return whereas CAPM uses multiple systematic factors.
  D. Under CAPM, the beta coefficient of the risk-free rate of return is assumed to be higher than that of any asset in the portfolio. Under APT, the beta coefficient of every asset in the portfolio is individual compared to the beta of the risk-free rate.
  B. CAPM uses a single systematic risk factor to explain an asset's return whereas APT uses multiple systematic factors.

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  Explanation

  CAPM uses a single systematic risk factor to explain an asset's return whereas APT uses multiple systematic factors.

• Question 995:

  Companies that adopt just-in-time purchasing systems often experience

  A. A reduction in the number of suppliers.
  B. Fewer deliveries from suppliers.
  C. A greater need for inspection of good as the good arrive.
  D. Less need for linkage with a vendo's computerized order entry system.
  A. A reduction in the number of suppliers.

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  Explanation

  The objective of jit is to reduce carrying costs by eliminating inventories and increasing the deliveries made by suppliers.Ideally,shipments of raw materials are received just in time to be incorpotated into the manufacturing process.the focus of quality control under jit is the prevention of quality problems.quality control is shifted to the supplier.Jit companies typically do not inspect incoming goods;the assumption is that receipts are of perfect quality.suppliers are limited to those who guarantee perfect quality and prompt delivery.

• Question 996:

  Bakker Industries sells three products (Products 611. 613. and 615) that it manufactures in a factory consisting of one department Both labor and machine time are applied to me products. Bakker's management is planning its production schedule for the next several months. There are labor shortages in the community. Some of the machines will be out of service for extensive overhauling. Available machine and labor time for each of the next 6 months is listed below.

  

  What is the excess (deficiency) for machine hours?

  A. (700) hours
  B. (400) hours
  C. 0 hours,
  D. 1,100 hours.
  B. (400) hours

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  Explanation

  The excess (deficiency) for machine hours ma given department is found by initially multiplying machine hours required per unit for that product by demand for that product. In this case, the total would be 1,000 for 611.400 for 613. and 2,000 for 615. The next step is to add these numbers together to get 3,400, and subtract that from machine hours available, 3,000. Therefore, the excess (deficiency) for machine hours would be a 400--hour deficiency (3,000 hours -- 3,400 hours).

• Question 997:

  A market-based scorecard and analysis may produce qualitative measures in the form of a customer-performance scorecard and a stakeholder-performance scorecard. A stakeholder-performance scorecard is most likely to contain a measure of

  A. Brand awareness
  B. Identification of intended positioning
  C. The satisfaction of suppliers
  D. Perception of product quality
  C. The satisfaction of suppliers

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  Explanation

  A customer- performance scorecard contains measures of new customers, lost customers, customer satisfaction, brand awareness, customer loyalty, identification of intended positioning and differentiation, perception of product of service quality compared with a chief rival, and others. A stakeholder-performance scorecard provides measures of the satisfaction of shareholders, creditors, employees, suppliers, and distributors.

• Question 998:

  Which one of the following is not an element of the strategic marketing process?

  A. Customer segmentation
  B. Market selection
  C. Value positioning
  D. Product pricing
  D. Product pricing

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  Explanation

  Market (customer) segmentation, market selection, and value positioning are all part of the strategic, or long-term, marketing process. Product pricing is an element of the tactical marketing process.

• Question 999:

  The tax impact of equipment depreciation affects capital budgeting decisions. Currently, me Modified Accelerated Cost Recover' System (MACRS) is used as the depreciation method for most assets for tax purposes. When employing the MACRS method of depreciation in a capita) budgeting decision, the use of MACRS as compared with the straight-line method of depreciation will result in?

  A. Equal total depreciation for both methods.
  B. MACRS producing less total depreciation than straight line.
  C. Equal total tax payments, after discounting for the time value of money.
  D. MACRS producing more total depreciation than straight line
  A. Equal total depreciation for both methods.

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  Explanation

  For tax purposes. straight-line depreciation is an alternative to the MACRS method. Both methods will result in the same total depreciation over the life of the asset: however, MACRS will result in greater depreciation in the early years of the assets life because it is an accelerated method. Given that MACRS results in larger depreciation deductions in the earj years, taxes will be lower in the early years and higher in the later years. Because the incremental benefits will be discounted over a shorter period than the incremental depreciation costs. `MACRS is preferable to the straight-line method,

• Question 1000:

  If firm' salute proposition has too many benefits. the result is most likely to be

  A. Confused positioning.
  B. Over positioning.
  C. Under positioning.
  D. Doubtful positioning.
  A. Confused positioning.

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  Explanation

  The brand image may be confused in customers' perceptions because the value proposition has too many benefits or the positioning has been changed.