IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 281:

  Gait Cost Magnetic Croatian (GCMC) is negotiating an intermediate-term loan to tenancy a jilt project with another comparer GCMC intends k sell its share of nature to its partner after 6 years. The lending bank has therefore agreed to structure the loan with a bacon payment at that time The amount of the loan is $100,000 GCMC will make level quarterly payments at an annual rate of 8%. Because the loan is to be only partially amortized, the payments are based on a full amortization life of 10 years Which one of the following statements in regard to this loan is true? (Round your answer to the nearest dollar.)

  A. The quarterly payment is $3,726.
  B. The quarterly payment is $5. 288.
  C. The balloon payment is $12,107.
  D. The balloon payment is $49,636
  D. The balloon payment is $49,636

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  Explanation

• Question 282:

  Conversion costs do not include

  A. Depreciation.
  B. Direct materials.
  C. Indirect labor.
  D. Indirect materials.
  B. Direct materials.

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  Explanation

  Conversion costs are necessary to convert raw materials into finished products. They include all manufacturing costs, for example, direct labor and factory overhead, other than direct materials.

• Question 283:

  A company is considering the purchase of a new machine to replace a five-year old machine and has gathered the following information:

  Purchase price of new machine $50,000

  Installation cost of new machine 4,000

  Market value (selling price) of the old machine 5,000 Book value of the old machine 2,000

  Increase in net working capital if new machine is installed 1,000 Effective income tax rate 40%

  It the company replaces the old machine with the new machine, what is the cash flow in period 0?

  A. $(49,000)
  B. $(51.200)
  C. $(51.800)
  D. $(53. 000)
  B. $(51.200)

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  Explanation

• Question 284:

  The formula for determining the value of one stock right when the price of the stock is rights-on is

  

  If: Ron = market value of one right when the stock is selling rights-on.

  Pon = market value of one share of stock with

  rights-on.

  N = number of nights necessary to purchase

  one share of stock.

  S = subscription price per share.

  If the market price of a stock is $50 per share, the subscription price is $40 per share, and three rights are necessary to buy an additional share of stock, the theoretical market value of one right used to buy the stock prior to the ex-rights date

  is

  A. $2. 00
  B. $2. 50
  C. $10.00
  D. $40.00
  B. $2. 50

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  Explanation

• Question 285:

  An advantage of a direct investment strategy when entering a foreign market is

  A. Reduction in the capital at risk
  B. Shared control and responsibility
  C. Assurance of access when the foreign country imposes domestic content rules
  D. Avoidance of interaction with the local bureaucracy
  C. Assurance of access when the foreign country imposes domestic content rules

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  Explanation

  Direct investment has many advantages:

  (1)

  cheaper materials or labor,

  (2)

  receipt of investment incentives from the host government,

  (3)

  a strong relationship with interested parties in the host country,

  (4)

  control of the investment,

  (5)

  a better image in the host country, and

  (6)

  market access when domestic contest rules are in effect. However, direct investment is risky because of exposure to currency fluctuations, expropriation, potentially high exit barriers, and restraints on sending profits out of the country.

• Question 286:

  A global firm

  A. Has achieved economies of scale in its domestic market
  B. Plans, operates, and coordinates business globally
  C. Relies on in direct export
  D. Trend to rely more on one product market
  B. Plans, operates, and coordinates business globally

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  Explanation

  According to Kotler,"Global firms plan, operate, and coordinate their activities on a worldwide basis." Thus, a global secures cost or product differentiate advantages not available to domestic firms.

• Question 287:

  A firm seeking to optimize its capital budget has calculated its marginal cost of capital and projected rates of return on several potential projects. The optimal capital budget is determined by

  A. Calculating the point at which marginal cost of capital meets the projected rate of return, assuming that the most profitable projects are accepted first.
  B. Calculating the point at which average marginal cost meets average projected rate of return, assuming the largest projects are accepted first.
  C. Accepting all potential projects with projected rates of return exceeding the lowest marginal cost of capital
  D. Accepting all potential projects with projected rates of return lower than the highest marginal cost of capital.
  A. Calculating the point at which marginal cost of capital meets the projected rate of return, assuming that the most profitable projects are accepted first.

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  Explanation

  In economics, a basic principle is that a firm should increase output until marginal cost equals marginal revenue. Similarly, the optimal capital budget is determined by calculating the point at which marginal cost of capital (which increases as capital requirements increase) and marginal efficiency of investment (which decreases if the most profitable projects are accepted first) intersect.

• Question 288:

  The prospect for the long-term profitability of an existing firm is greater when

  A. The firm operates in an industry with a steep learning curve in its production process.
  B. The costs of switching suppliers is low.
  C. New entrants are encouraged by government policy.
  D. Distribution channels are willing to accept new products.
  A. The firm operates in an industry with a steep learning curve in its production process.

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  Explanation

  The prospects of long-term profitability are contingent upon the industry's exit and entry barriers. The entry of new firms in a market decreases the prospect for long-term profitability. When a firm operates in an industry that has a steep learning curve, it is more difficult for new firms to enter the market. Thus, the prospects of long-term profitability are greater for an existing firm.

• Question 289:

  A financial manager usually prefers to issue preferred stock rather than debt because

  A. Payments to preferred stockholders are not considered fixed payments
  B. The cost of fixed debt is less expensive since it is tax deductible even if a sinking fund is required to retire the debt.
  C. The preferred dividend is often cumulative, whereas interest payments are not.
  D. In a legal sense, preferred stock is equity, therefore, dividend payments are not legal obligations
  D. In a legal sense, preferred stock is equity, therefore, dividend payments are not legal obligations

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  Explanation

  For a financial manager, preferred stock is preferable to debt because dividends do not have to be paid on preferred stock, but failure to pay interest on debt could lead to bankruptcy. Thus, preferred stock is less risky than debt. However, debt has some advantages over preferred stock, the most notable of which is that interest payments are tax deductible. Preferred stock dividends are not.

• Question 290:

  Which of the following is correct for a firm with $100000 in net earnings, 10,000 shares, and a 30% payout ratio?

  A. Retained earnings will increase by $30,000.
  B. Each share will receive a $0.30 dividend.
  C. $30,000 will be spent on new investment.
  D. The dividend per share will equal $3. 00.
  D. The dividend per share will equal $3. 00.

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  Explanation

  Earnings per share is and10 ($100,000 ?10,000 shares). Of the $10,30% or $3 is paid out as dividend.