Multiple Choice (3 points20 = 60 points):1. Which of the following is not considered one of the basic questions of corporate finance? A)What long-lived assets should the firm invest?B)How much inventory should the firm hold?C)How can the firm raise cash for required capital expenditures?D)How should the short-term operating cash flows be managed?E)All of the above.Answer: B Difficulty: Medium Page: 4 2.Generally accepted accounting principles may recognize and record a sale A)before a customer pays assuming they will pay soon. B)only after the company receives payment in full. C)when the company receives at least 50% of the total revenue from the customer. D)All of the above. E)None of the above. Answer: A Difficulty: Medium Page: 7 3. Working capital management includes decisions concerning which of the following?I. accounts payableII. accounts receivableIII. long-term debtIV. inventory A. I and II onlyB. I and III onlyC. II and IV onlyD. I, II, and IV onlyE. I, III, and IV onlyAnswer:D4.Fixed assets can be either tangible or intangible. Intangible assets A)are property, plant and equipment. B)can be converted to cash in the normal course of business. C)may be very valuable, although they have no physical presence, such as trademarks or patents. D)are highly liquid. E)None of the above. Answer: C Difficulty: Medium Page: 22 5.In 2004, TimeNow Corporation had fixed assets of $1,345, current assets of $260, current liabilities of $180 and shareholders equity of $775. What was the net working capital for TimeNow in 2004? A)$ 80 B)$180 C)$260 D)$390 E)None of the above. Answer: A Difficulty: Medium Page: 26 Rationale: $260 - $180 = $806.What is the effect on net working capital if the corporation decides to increase its investment in inventory and pay for it with cash? A)Increase in net working capital. B)Decrease in net working capital. C)Depends on the amount of the investment. D)No change in net working capital. E)None of the above. Answer: D Difficulty: Medium Page: 26-27 7.If you have a choice to earn simple interest on $10,000 for three years at 8% or annually compound interest at 7.5% for three years which one will pay more and by how much? A)Simple interest by $50.00 B)Compound interest by $22.97 C)Compound interest by $150.75 D)Compound interest by $150.00 E)None of the above. Answer: B Difficulty: Medium Page: 64 Rationale: Simple Interest = $10,000 (.08)(3) = $2,400; Compound Interest = $10,000(1.075)3 1) = $2,422.97;Difference = $2,422.97 - $2,400 = $22.978. What is the relationship between present value and future value interest factors? A. The present value and future value factors are equal to each other.B. The present value factor is the exponent of the future value factor.C. The future value factor is the exponent of the present value factor.D. The factors are reciprocals of each other.E. There is no relationship between these two factors.Answers: D9.You have deposited $1,500 in an account that promises to pay 8% compounded quarterly for the next five years. How much will you have in the account at the end? A)$1,598.33 B)$2,203.99 C)$2,228.92 D)$6,991.44 E)None of the above. Answer: C Difficulty: Medium Page: 72-73 Rationale: $1,500(1.02)20 = $2,228.9210.The process of calculating the present value of a future cash flow A)is called discounting which is the same as compounding. B)is called discounting which is the opposite of compounding. C)uses the present value factor to perform the discounting. D)Both A and C. E)Both B and C. Answer: E Difficulty: Medium Page: 75 11.What is the present value of a payment of $21,000 three years from now if the annual interest rate is 4%? A)$17,951 B)$18,480 C)$18,658 D)$18,669 E)$19,218 Answer: D Difficulty: Medium Page: 70 Rationale: PV = FV/(1+r)n = $21,000/(1+.04)3 = $18,668.9212.This afternoon, you deposited $1,000 into a retirement savings account. The account will compound interest at 6 percent annually. You will not withdraw any principal or interest until you retire in forty years. Which one of the following statements is correct?A.The interest you earn six years from now will equal the interest you earn ten years from now.B.The interest amount you earn will double in value every year.C.The total amount of interest you will earn will equal $1,000 .06 40.D.The present value of this investment is equal to $1,000.E.The future value of this amount is equal to $1,000 (1 + 40).06.Answer: D13. Luis is going to receive $20,000 six years from now. Soo Lee is going to receive $20,000 nine years from now. Which one of the following statements is correc