IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 101:

  The method that recognizes the time value of money by discounting the after-tax cash flows over the life of a project, using the company's minimum desired rate of return is the

  A. Accounting rate of return method.
  B. Net present value method.
  C. Internal rate of return method.
  D. Payback method.
  B. Net present value method.

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  Explanation

  The net present value (NPV) method computes the discounted present value of future cash inflows to determine whether they are greater than the initial cash outflow. The discount rate (cost of capital or hurdle rate) must be known to discount the future cash inflows. If the NPV is positive (present value of future cash inflows exceeds initial cash outflow), the project should be accepted. If the NPV is negative, the project should be rejected.

• Question 102:

  How math must the stock b wolf at .spirant in order for a II homer to break even f the eerie price is $60 and the call premium was $3?

  A. $57. 00
  B. $6000
  C. $61.50
  D. $63. 00
  D. $63. 00

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  Explanation

  Because the call premium is $3, the stock pence must be at least $63 ($60 exercise price + $31 cat premium).

• Question 103:

  What is the pence of a 10-year, 10% coupon bond with a $1 .000 face value if investors require a 12% return? Assume annual coupon payments.

  A. $565. 00
  B. $322. 00
  C. $604. 50
  D. $887. 00
  B. $322. 00

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  Explanation

  The pence of the bond is equal to the sum of present value of the face value of the bond and the present value of the interest payments. Thus, the price is $887. 00 [($1 .000 x .322 PV factor) + ($100 x 5. 65 PV factor)].

• Question 104:

  Which one of the following is not a characteristic of a negotiable certificate of deposit?

  Negotiable certificates of deposit

  A. Have a secondary market for investors.
  B. Are regulated by the Federal Reserve System.
  C. Are usually sold in denominations of a minimum of $100,000.
  D. Have yields considerably greater than bankers' acceptances and commercial paper.
  D. Have yields considerably greater than bankers' acceptances and commercial paper.

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  Explanation

  A certificate of deposit (CD) is a form of savings deposit that cannot be withdrawn before maturity without incurring a high penalty. A negotiable CD can be traded. CDs usually have a fairly high rate of return compared with other savings instruments because they are for fixed, usually long-term periods. However, theiryield is less than that of commercial paper and bankers' acceptances because they are less risky.

• Question 105:

  A company allocates its variable factory overhead based on direct labor hours. During the past 3 months1 the actual direct labor hours and the total factory overhead allocated were as follows:

  

  Based upon this information, monthly fixed factory overhead was

  A. $50,000
  B. $46,667
  C. $33,333
  D. $30,000
  A. $50,000

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  Explanation

• Question 106:

  Whatney Co. is considering the acquisition of a new, more efficient press. The cost of the press is $360,000, and the press has an estimated 6-year life with zero salvage value. Whatney uses straight-line depreciation for both financial reporting and income tax reporting purposes and has a 40% corporate income tax rate. In evaluating equipment acquisitions of this Pjpe, Whatney uses a goal of a 4-year payback period. To meet Whatney's desired payback period, the press must produce a minimum annual before-tax operating cash savings of

  A. $90,000
  B. $110,000
  C. $114,000
  D. $150,000
  B. $110,000

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  Explanation

  Payback is the number of years required to complete the return of the original Investment. Given a periodic constant cash flow, the payback period equals net investment divided by the constant expected periodic after-tax cash flow. The desired payback period is 4 years, so the constant after-tax annual cash flow must be $90,000 ($360,000 + 4). Assuming that the company has sufficient other income to permit realization of the full tax savings, depreciation of the machine will shield $60,000 ($360,000 + 6) of income from taxation each year, an after-tax cash savings of $24,000 ($60,000 x 40%). Thus, the machine must generate an additional $66,000 ($90,000 -- $24,000) of after-tax cash %avings from operations. This amount is equivalent to $110,000 [$66,000 + (1.0-- .4)] of before-tax operating cash savings.

• Question 107:

  A company has sales of one of its products of $400,000 per year and a contribution margin ratio of 20%. s margin of safety is $40,000 What is the company's breakeven point?

  A. $360,000
  B. $320,000
  C. $288,000
  D. $80,000
  A. $360,000

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  Explanation

  The margin of safety equals sales above the breakeven point. Thus, if the margin of safety is $40,000, the breakeven point must be $360,000 ($400,000 sales -- $40,000)

• Question 108:

  For one of its divisions, Buona Fortuna Company has fixed costs of $300,000 and a variable-cost percentage equal to 60% of its $10 per unit selling price. It would like to earn a pre-tax income of $90,000 per year from the division. How many units will Buona Fortuna have to sell to earn a pre-tax income of $90,000 per year?

  A. 65. 000 units.
  B. 75. 000 units.
  C. 77. 250 units,
  D. 97,500 units.
  D. 97,500 units.

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  Explanation

  The breakeven point is calculated by dividing the fixed costs by the unit contribution margin in dollars To determine how many units need to be sold to yield a specific income, that income should be treated as a fixed cost. Thus, adding the $90,000 of desired income to the $300,000 of fixed costs results in a numerator of $390,000. Hence, the necessary unit sales equals 97. 500 units [$390,000 + ($10 unit price -- $6 unit variable cost)].

• Question 109:

  Prior to the introduction of the euro, if one Swiss franc can purchase $0.42 U.S. dollars, how many Swiss francs can $1 U.S. buy?

  A. 2. 38
  B. 1.00
  C. 0.58
  D. 24
  A. 2. 38

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  Explanation

  Given the value of a franc, the value of $1 will simply be the inverse. Thus, $1 / .42 = 2. 38 francs per dollar.

• Question 110:

  Of the major processes affecting the evolution on industry, which one affects rivalry, entry, expansion, and supply?

  A. Long-run changes in the industry growth rate.
  B. Changes in input costs
  C. Structural changes in suppliers' and customer's industries
  D. Government policies
  A. Long-run changes in the industry growth rate.

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  Explanation