QUESTION: 99 Topic 2: Part 2 Sec Two (53 to 100)

Stroll, Inc. is in the process of making an investment decision. It has identified the following alternative investment opportunities: real estate, stocks, bonds, or mutual funds. After determination of the investment alternatives, Stroll will go through all of the following logical steps of the decision analysis model, except:

Obtaining information about the investment alternatives.
Evaluating the investment alternatives.
Selecting an alternative which best fits the investment criteria.
Defining the problem of high unused cash balance.

Answer(s): D

Explanation:

The parameters of what to do with high unused cash balances are set forth as a result of the investment choice that is eventually made. It is not an appropriate factor in the decision whether to undertake an investment to begin with.

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QUESTION: 100 Topic 2: Part 2 Sec Two (53 to 100)

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Okra, Inc. has been experiencing sales difficulties over the last two years. Management has identified the problem: poor customer service and lack of internal coordination among the marketing department, the production department, and the finance department. In making a decision to solve the problem, management took the following logical steps (not necessarily in this order):
1. Concluded that extensive training would improve performance and efficiency of all the involved departments; replacing the head of the marketing department will increase
profitability only; and investing in information technology will improve customer satisfaction but will not solve communication problems.
2. Identified three possible ways to solve the problem: extensive personnel training in the involved departments; replacing the head of the marketing department or investing in IT.
3. Agreed upon key performance indicators, such as customer satisfaction, customer retention, and product and customer profitability to assess the effectiveness of the proposed solution.
4. Decided to conduct extensive training for marketing department personnel and limited communication training for production and finance departments. What is the correct sequence of these logical decision-making steps?

1,2,3,4.
2,1,3,4.
3,1,2,4.
2,3,1,4.

Answer(s): D

Explanation:

The correct sequence of steps in a rational decision making process are as follows, keyed to the steps in Okra's process: defining the problem, obtaining information, identifying alternative courses of action, making predictions about the future costs, choosing and justifying an alternative, implementing the decision, and evaluating performance to provide feedback.

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QUESTION: 1 Topic 1: Part 2 Sec One (1 to 52)

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Malony, Inc.'s $1,000 par value preferred stock paid its $100 per share annual divided on April 4 of the current year. The preferred stock's current market price is $960 a share on the date of the dividend distribution. Maloney's marginal tax rate (combined federal and state) is 40%, and the firm plans to maintain its current capital structure relationship. The component cost of preferred stock to Maloney would be closest to

6%
6.25%
10%
10.4%

Answer(s): D

Explanation:

Dividends on preferred stock are not deductible for tax purposes; therefore, there is no adjustment for tax savings. The annual dividend on preferred stock is $100 when the price of the stock is $960.This results in a cost of about 10.4% ($100 + $960).

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QUESTION: 2 Topic 1: Part 2 Sec One (1 to 52)

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The theory underlying the cost of capital is primarily concerned with the cost of

Long-term funds and Old funds.
Short-term funds and new funds
Long-term funds and new funds.
Short-term funds and old funds.

Answer(s): C

Explanation:

The theory underlying the cost of capital is based primarily on the cost of long-term funds and the acquisition of new funds.. The reason is that long-term funds are used to finance long-term investments. For an investment alternative to be viable, the return on the investment must be greater than the cost of the funds used. The objective in short- term borrowing is different. Short-term loans are used to meet working capital needs and not to finance long-term investments.

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QUESTION: 99 Topic 2: Part 2 Sec Two (53 to 100)

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QUESTION: 100 Topic 2: Part 2 Sec Two (53 to 100)

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QUESTION: 1 Topic 1: Part 2 Sec One (1 to 52)

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QUESTION: 2 Topic 1: Part 2 Sec One (1 to 52)

Explanation:

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