IMANET IMANET-CMA Online Practice Questions and Exam Preparation

IMANET IMANET-CMA Online Questions & Answers

• Question 471:

  In an emerging industry,

  A. Price wars are likely.
  B. Defending market share and maximization of profits are the key strategies.
  C. Specific strategies are more beneficial than general strategies.
  D. Competitors are few, and customers must be corniced to try the product.
  D. Competitors are few, and customers must be corniced to try the product.

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  Explanation

  An emerging industry is characterized by technological uncertainty regarding products and production methods. Also, strategic uncertainty arises because effective strategies have not yet been identified. Hence, firms are experimenting th product features, production methods, marketing approaches. etc. Moreover, competitive intelligence is necessarily poor because competitors have not been identified, and industry sales and other data are not available. By definition, customers are first-time birers. The marketing problem is to convince these customers that the benefits of substituting the product or service for something else exceeds the asks.

• Question 472:

  The best example of a marketable security with minimal risk would be

  A. Municipal bonds.
  B. The common stock of an Aaa-rated company.
  C. Gold.
  D. The commercial paper of an Aaa-rated company.
  D. The commercial paper of an Aaa-rated company.

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  Explanation

  Of the choices given, the commercial paper of a top-rated (most creditworthy) company has the risk. Commercial paper is preferable to stock or stock options because the latter represent only a residual equity in a corporation Commercial paper is debt and thus has priority over shareholders' claims. Also, commercial paper is a very short-term investment. The maximum maturity allowed without SEC registration is 270 days. However, it can be sold only to sophisticated investors without registration.

• Question 473:

  A corporation is currently experiencing cash-flow problems and has determined that it is in need of short-term credit. It can either use its trade credit on $100,000 of accounts payable with terms of 1/10, net 30 or a 30-day note with a 20% annual simple interest rate. Which is the best alternative, and what is its effective rate of interest (rounded to a whole percentage and using a 360-day year)?

  A. The trade credit. Its effective rate is 10%.
  B. The trade credit. Its effective rate is 20%.
  C. The note. Its effective rate is 17%
  D. The note. Its effective rate is 20%.
  B. The trade credit. Its effective rate is 20%.

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  Explanation

• Question 474:

  If a bond sells at a premium, the

  A. Stated coupon rate must be less than the required market rate
  B. Nominal rate must be less than the yield rate.
  C. Bond purchase price must be more than the fair market value of the bond.
  D. Stated coupon rate must be more than the required market rate.
  D. Stated coupon rate must be more than the required market rate.

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  Explanation

  If the stated, or coupon, rate of a bond is higher (lower) than the effective; or market; rate on the date of issue, the bonds sell at a premium (discount).

• Question 475:

  When choosing the best available solution to a problem, human aspects of the choice must be considered. Which is a true statement regarding human aspects of the choice?

  A. The opinions and attitudes of the people involved do not require consideration.
  B. The people involved do not have to be convinced of the decision's value.
  C. Decisions do not have unexpected effects.
  D. Implementing change is a critical part of the decision-making process.
  D. Implementing change is a critical part of the decision-making process.

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  Explanation

  The selection of the best available solution is the objective of the decision-making process. Human aspects of the choice must be considered. The multistep process of decision making must be followed when making organizational changes. Implementing change is a critical part of the decision-making process because people are crucial to the effectiveness of the choice.

• Question 476:

  The net present value method of capital budgeting assumes that cash flows are reinvested at

  A. The risk-free rate.
  B. The cost of debt.
  C. The rate of return of the project.
  D. The discount rate used in the analysis.
  D. The discount rate used in the analysis.

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  Explanation

  The NPV method assumes that periodic cash inflows earned over the life of an investment are reinvested at the company's cost of capital (i.e., the discount rate used in the analysis). This is contrary to the assumption under the internal rate of return method, which assumes that cash inflows are reinvested at the internal rate of return. As a result of this difference, the two methods will occasionally give different rankings of investment alternatives.

• Question 477:

  Strategic planning is

  A. Short term.
  B. Operational
  C. Long term
  D. Informal
  C. Long term

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  Explanation

  Strategic planning, also called long-term planning, covers periods from 1 to 20 years. Strategic planning is somewhat difficult because of uncertainty about future conditions. Thus, long-term plans are more general and exclude operational detail.

• Question 478:

  Yipann Corporation is reviewing an investment proposal. The initial cost, as well as other related data for each year. are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the Yipann uses a 24% after4axtargetrate of return for new investment proposals. The discount figures for a 24% rate of return are given.

  

  The traditional payback period for the investment proposal is

  A. .875 years.
  B. 1.833 years.
  C. 2. 250 years.
  D. Over5years.
  C. 2. 250 years.

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  Explanation

  The payback period is the time required to recover the initial investment. The net cash inflows used to determine the payback period are not discounted. The initial cost was $105,000, and inflows during the first 2 years were $95,000 ($50,000

  + $45,000). Thus, the first $10,000 ($105,000 -- $95,000) of the third year's net cash inflows will complete the recovery' of the initial investment. This amount is one1ourth of the third year's inflows. Hence, the payback period is 2. 25 years.

• Question 479:

  According to a business portloho analysis model developed by General Electric. if a strategic business unit is classified in Zone 1, what are the possible BUS and MAT combinations?

  A. Strong BUS and High MAT, medium BUS and high MAT, strong BUS and medium MAT.
  B. Medium BUS and low MAT, weak BUS and medium MAT, weak BUS and low MAT.
  C. Strong BUS and low MAT, medium BUS and MAT, weak BUS and high MAT.
  D. Strong BUS and high MAT, medium BUS and MAT, weak BUS and low MAT.
  A. Strong BUS and High MAT, medium BUS and high MAT, strong BUS and medium MAT.

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  Explanation

  Zone 1 is located in the upper left-hand corner of the diagram. It consists of strong BUS and high MAT, medium BUS and high MAT, strong BUS and medium MAT.

• Question 480:

  McLean, Inc. is considering the purchase of a new machine that will cost $160,000. The machine has an estimated useful life of 3 years. Assume that 30% of the depreciable base will be depreciated in the first year1 40% in the second year, and 30% in the third year. The new machine will have a $10000 resale value at the end of its estimated useful life. The machine is expected to save the company $85000 per year in operating expenses. McLean uses a 40% estimated income tax rate and a 16% hurdle rate to evaluate capital projects. Discount rates for a 16% rate are as follows:

  

  The payback period for this investment would be

  A. 1.88years.
  B. 3. 00 years.
  C. 2. 23years.
  D. 1.62 years.
  C. 2. 23years.

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  Explanation

  The payback period is the number of years required for the cumulative undiscounted net cash inflows to equal the original investment. The future net cash inflows consist of $69,000 in Year 1 and 3, $75,000 in Year 2, and $10,000 upon resale. After 2 years, the cumulative undiscounted net cash inflow equals $144,000. Thus, $16,000 ($160,000 -- $144,000) is to be recovered in the Year 3, and payback should be complete in approximately 2. 23 years [2 years + ($16,000 ?$69,000 net cash inflow in third year)]