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NEW QUESTION # 58
Delman inc considering upgrading its manufacturing facility, and it is expected that the new equipment will cost $180,000. The project's is considering similar to the risk of the firm's other investments. the after-tax cash inflows attribute to this project are expected to increase by $50,000 every year over the next five years. The firm's marginal tax rate is 30%, its debt-to-equal ratio (using market values) is 60%, and its pre-tax cost of debt and equity are 8% and 12% respectively. the weighted average cost of capital appropriate for evaluating this project is closest to
- A. 10.5%
- B. 8.0%
- C. 8.2%
- D. 9.6%
Answer: D
NEW QUESTION # 59
A corporation's board of directors has just declared its next regular quarterly cash dividend. The record date for this dividend will occur
- A. after the ex-dividend date and after the payment date
- B. before the ex-dividend date and after the payment date
- C. before the ex-dividend date and before the payment date
- D. before the payment date and after the ex-dividend date
Answer: C
NEW QUESTION # 60
Which one of the following moral philosophies states that the morality of an action is inherent and not based on the consequences of the action?
- A. Utilitarianism
- B. Relativism
- C. Teleology
- D. Deontology
Answer: D
NEW QUESTION # 61
IF a company does not have a code of conduct, the company most likely
- A. must find another way to express its ethical principles
- B. is missing important guidance on ethical decision making
- C. can use its statement of values instead to implement ethics in daily decision making
- D. will lack an expressed statement of values regarding ethical behavior
Answer: B
NEW QUESTION # 62
Safety Strollers was recently sued by several people who alleged harmful and unsafe strollers. The management team was largely unconcerned about these lawsuits due to the apparent negligence of the plaintiffs However, a consumer grassroots effort Drought these dangers into the public eye and the management team now fears for their brand s reputation and the sales o' their products. The facts are staring to get distorted and some stores are electing to no longer carry this brand. This situation could best be considered a
- A. hazard loss mal can be mitigated with liability insurance
- B. cost of doing business mat the company's m-house legal counsel will hand.
- C. financial risk managed through product diversification
- D. catastrophic force that could have been managed better with a robust crisis management plan
Answer: A
NEW QUESTION # 63
Slam-Dunk Shoes has 5,000 pairs or damaged shoes in inventory. The cost of these shoes was $51,000. in their present condition, the shoes may be sold at clearance prices for $29,000 Slam-Dunk can have the shoes repaired at a cost of $77,000 after which they can be sold for $100,000. What is the opportunity cost of selling the shoes in their present damaged condition?
- A. $77, 000
- B. $23.000
- C. $100, 000
- D. $71.000
Answer: B
NEW QUESTION # 64
L&H Sports owns and operates several stadiums used for baseball and soccer games Management is considering installing machines that would be used to roast peanuts on the premises. This equipment would allow L&H to sell freshly roasted peanuts rather than the pre-roasted peanuts that are currently sold Marketing studies suggest that this feature would increase peanut sales.
The roasters can be purchased in several sizes, and the annual rental fees and operating costs vary with the size of the roaster Information about the roasters is shown below.
L&H currently sells pre-roasted peanuts for $0 60 pet bag. Management plans to sell the freshly roasted peanuts for a higher price but at no more than a 10% increase. The demand for freshly roasted peanuts is estimated to be 250, 000 bags pet year. Which roaster should L&H purchase to maximize its profit?
- A. Regular
- B. Super
- C. Economy
Answer: A
NEW QUESTION # 65
Calculate AMI's degree of operating leverage. Show your calculations.
Essay
Apex Manufacturing lnc. (AMI) is a Canada-based company that manufactures a manufactures and unique part for aircrafts. It has few competitors in the market. The company is exposed to exchange rate risk because about 90% of its products are exported to the U.S, and most of its sales contracts are in U.S. dollars. AMI has the capacity to manufacture 1,500 units of the part per year. For the year just ended. AMI manufactured and sold 1,000 units. The operating results are shown below.
Recently, A new customer made a one-area order of 500 units of the part at $1.200 per unit. The CTO asked the controller to analyze this offer. AMI is considering adjusting its sales price next year in a recent meeting, the CFO suggested to use the market-based approach for pricing decisions, bat the controller insisted that the cost-based approach is more favorable to the company.
Answer:
Explanation:
See the explanation for the answer.
Explanation
$1m/$0.5,
2 times
contribution/operating income
They can simply revalue their assets and hence ask for a higher price for their company or they re structure their financing structure by either issuing fleets or reducing me equity by paying a special one off dividend.
NEW QUESTION # 66
Explain one reason each Tot and against issuing bonds with a call feature Essay Quality Digital Design (QDD) Inc is a public-traded technology company Selected financial data of QDD for the prior year are as follows
QDD's stock was trading at $160 per share at the beginning of the yea: and at $176 per share by the end of the year. The company paid dividends of S5 per share. The company "s stock had a beta of 1 4 The stock market provided a total return of 12% last year, well above the 3% risk free rate of return QDD is considering the issuance of $200 million of bonds to fund the repurchase of $200 million of its stock.
QDD is evaluating the bond, including its term structure, maturity, and whether it should be callable obtaining the lowest coupon interest is an important objective of QDD. The CFO has estimated that sales for the current year would remain the same as last year and the new bond would add S12 million in annual interest payments.
Answer:
Explanation:
See the explanation for the answer.
Explanation
A callable bond allows companies to pay off their debt early and benefit from favorable interest rate drops a callable bono benefit the issuer and so investors of these bonds are compensated with a more attractive interest rate man on otherwise similar non-callable bonds However callable bonds are more expensive.
NEW QUESTION # 67
Risk maps are used in companies' enterprise risk management system because risk maps
- A. compares the impact of a risk and the likelihood of occurrence to provide a qualitative assessment of the risk
- B. provide a quantitative tool that measures the probability of occurrence and the potential impact to calculate a potential loses
- C. rank risks Based on the potential loss that could occur it a risk were to materialize
- D. are a generic set of risks for the company's industry that can then be used as a foundation for further risk-identification techniques to specify the risks relevant for the company.
Answer: A
NEW QUESTION # 68
A management accountant overheard the company's procurement manager discussing a kickback payment for one of the company s recent projects. The procurement manager promised to pay a share to the other person II the arrangement was kept confidential According to the IMA Statement of Ethical Professional Practice which one of the following is the most appropriate action for the management accountant to take?
- A. Discuss the incident with his or her own attorney and consider disassociating from the company
- B. Take no action since the incident is not related to the accounting department
- C. Call the company's ethics helpline and report the matter anonymously
- D. Report the information directly to a nigh-level company executive since it is a serious matter
Answer: D
NEW QUESTION # 69
Willcox Company plans to sell 100 000 units of Us only product for $300 per unit to its existing customers It has received a new customer request for 10,000 units at a selling price of $2S0 per unit Willcox's cost structure is shown below.
Capacity exists lo produce an additional 10 000 units and accepting the order would have no long-term implications If the order is accepted however a specialized piece of equipment costing S25 000 would need to I purchased If Wilcox accepts the special order its income would increase by
- A. $1400, 000.00
- B. $375,000.00
- C. $75,000.00
- D. $1,375,000.00
Answer: D
NEW QUESTION # 70
The human resources manager of BankUS has noted mat me company s employee turnover has increased. He has also had his budget cut, and will have to reduce training for new associates. He has a meeting scheduled with the CFO lo go over risks that his department faces. What should the human resources manager tell the CFO about risk?
- A. He should notify the CFO of a potential internal factor risk
- B. He should notify the CFO of a potential operations risk
- C. He should notify the CFO of a need for additional funding
- D. Me does not need to notify me CFO of a potential risk
Answer: B
NEW QUESTION # 71
In an Enterprise Risk Management environment, which one of the following is the best example of risk sharing?
- A. Self-insuring against loss
- B. Reallocating capital among operating units
- C. Establishing operational limits
- D. Outsourcing business processes
Answer: D
NEW QUESTION # 72
Below is the income statement and balance sheet for a retail corporation.
What is the corporation's debt to total capital in year 2?
- A. 71%
- B. 6%
- C. 41%
- D. 19%
Answer: D
NEW QUESTION # 73
A risk with a high frequency of occurrence but with a low impact, is best managed by which one of the following risk response strategies?
- A. Risk transfer
- B. Risk acceptance
- C. Risk avoidance
- D. Risk reduction
Answer: D
NEW QUESTION # 74
A company currently offers all of its customers trade credit with terms of 1/15 net 45 of the following alternatives which would not Increase the company's average collection period from its current level?
- A. I only.
- B. I and II only
- C. Ill and Iv only.
- D. III only
Answer: B
NEW QUESTION # 75
Discuss whether QDD stock provided a return that was Better, worse, or the same as its investors would have expected using CAPM snow your calculations Essay Quality Digital Design (QDD) Inc is a public-traded technology company Selected financial data of QDD for the prior year are as follows
QDD's stock was trading at $160 per share at the beginning of the yea: and at $176 per share by the end of the year. The company paid dividends of S5 per share. The company "s stock had a beta of 1 4 The stock market provided a total return of 12% last year, well above the 3% risk free rate of return QDD is considering the issuance of $200 million of bonds to fund the repurchase of $200 million of its stock.
QDD is evaluating the bond, including its term structure, maturity, and whether it should be callable obtaining the lowest coupon interest is an important objective of QDD. The CFO has estimated that sales for the current year would remain the same as last year and the new bond would add S12 million in annual interest payments
Answer:
Explanation:
See the explanation for the answer.
Explanation
As per CAPM Model the return is
3% * 1.2 (12-3)
13 8% TSR-S5'(S176-S160)'$160
TSR-13 12%
The return provided of the company stock was lower as the return provided by the capm model was signify higher than it
NEW QUESTION # 76
Which one of the following statements best describes an offering after an initial public offering where a benchmark stock price will already exist?
- A. Subsequent or secondary public offering.
- B. Stock repurchase
- C. Over-the-counter offering
- D. Private placement
Answer: A
NEW QUESTION # 77
Company Y records a receivable from a foreign customer in Company Y's functional currency. The receivable is due in 90 days and is to be paid in the customer s currency. This is an example of which type of risk exposure?
- A. Economic risk
- B. Transaction risk
- C. Translation risk
- D. Foreign investment risk
Answer: B
NEW QUESTION # 78
Essentials inc. operates two segments. Segment A and Segment B information about the revenues and costs for Essentials tot the previous year (by segment) is shown below The above analysis shows that Segment A is not profitable if Segment A is dropped, the revenues associated with the account will be lost and the related variable costs win be eliminated Also, the space freed by this product line will be rented for $40.000. The operating profit (loss) after dropping Segment A will be
- A. ($35,000)
- B. $90.000
- C. $5,000
- D. $50.000
Answer: C
NEW QUESTION # 79
A company has hired a consultant to propose a way to increase the company's revenues. The consultant has evaluated two mutually exclusive projects with me following information provided for each project.
The company uses a discount rate of 9% to evaluate both projects Based on the net present value, the company should invest in
- A. project A only
- B. neither project
- C. project B only
- D. project A and project B
Answer: A
NEW QUESTION # 80
The CFO at GameX, a handheld game manufacturer has asked a financial analyst to provide an analysis and evaluation of the company versus three of its competitors. The analyst prepared the following report.
Based or the analysis the analyst is justified to write in his evaluation mat in order to Improve its position in the market. GameX should
- A. reduce its debt load
- B. increase its inventory
Answer: A
NEW QUESTION # 81
A company plans to purchase equipment for $110 000. The equipment is expected to generate an annual cash flow o( $44 500 (of the next three years The company has a predetermined hurdle rate of 9% Using the internal rate of return (IRR). should the company purchase this equipment?
- A. No, the IRR is less than the hurdle rate
- B. Yes, the IRR is greater than the hurdle rate
- C. Yes, the IRR is less than the hurdle rate
- D. No, the IRR is greater than the hurdle rate
Answer: B
NEW QUESTION # 82
A corporation shows the following on its financial statements (in millions).
The corporation has a financial leverage ratio of
- A. 0.50
- B. 2.00
- C. 0.06
- D. 3.60
Answer: A
NEW QUESTION # 83
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The IMA CMA-Strategic-Financial-Management exam covers a wide range of topics, including financial statement analysis, corporate finance, risk management, performance measurement, and decision analysis. Candidates must demonstrate their ability to apply these concepts to real-world scenarios and make informed, data-driven decisions. Successful completion of CMA-Strategic-Financial-Management exam signifies that a candidate has the skills and knowledge necessary to become a trusted strategic partner in their organization's financial decision-making process.
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