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CMA Part 2 Practice Exam 2

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Question 1 of 10

1. Question

A firm has a target capital structure of 40% debt and 60% equity. The pre-tax cost of debt is 8%, the marginal tax rate is 25%, and the cost of equity is 12%. What is the firm’s WACC?

10.4%
Correct Incorrect Correct answer

9.6%
Correct Incorrect Correct answer

8.8%
Correct Incorrect Correct answer

10.0%
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Question 2 of 10

2. Question

Using the Capital Asset Pricing Model (CAPM), calculate the required rate of return for a stock with a beta of 1.2, a risk-free rate of 4%, and an expected market return of 10%.

11.2%
Correct Incorrect Correct answer

16.0%
Correct Incorrect Correct answer

12.0%
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7.2%
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Correct

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Question 3 of 10

3. Question

A company is expected to pay a dividend of $2.00 next year. The dividend grows at a constant 5% per year indefinitely. If the required rate of return is 10%, what is the intrinsic value of the stock using the Dividend Discount Model?

$20.00
Correct Incorrect Correct answer

$42.00
Correct Incorrect Correct answer

$40.00
Correct Incorrect Correct answer

$21.00
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Question 4 of 10

4. Question

A firm has sales of $1,000,000, variable costs of $600,000, and fixed operating costs of $200,000. What is the firm’s Degree of Operating Leverage (DOL)?

2.0
Correct Incorrect Correct answer

5.0
Correct Incorrect Correct answer

1.67
Correct Incorrect Correct answer

4.0
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Correct

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Question 5 of 10

5. Question

A company has Current Assets of $500,000 and a Current Ratio of 2.5. If the company uses $50,000 of cash to pay down accounts payable, what is the new Current Ratio?

2.5
Correct Incorrect Correct answer

3.0
Correct Incorrect Correct answer

2.25
Correct Incorrect Correct answer

3.25
Correct Incorrect Correct answer

Correct

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Question 6 of 10

6. Question

An American company expects to receive 10 million Euros in six months. To hedge its currency risk, the company would most likely:

Buy a Euro call option.
Correct Incorrect Correct answer

Sell Euro futures contracts.
Correct Incorrect Correct answer

Buy Euro futures contracts.
Correct Incorrect Correct answer

Purchase a Yen-denominated bond.
Correct Incorrect Correct answer

Correct

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Question 7 of 10

7. Question

Which of the following describes an aggressive working capital financing policy?

Financing all fixed assets with long-term debt.
Correct Incorrect Correct answer

Financing a portion of fixed assets with short-term debt.
Correct Incorrect Correct answer

Maintaining high inventory levels to avoid stockouts.
Correct Incorrect Correct answer

Financing temporary current assets with long-term equity.
Correct Incorrect Correct answer

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Question 8 of 10

8. Question

A product has a selling price of $80, variable costs of $50, and total fixed costs of $120,000. What is the breakeven point in units?

1,500 units
Correct Incorrect Correct answer

2,400 units
Correct Incorrect Correct answer

4,000 units
Correct Incorrect Correct answer

2,000 units
Correct Incorrect Correct answer

Correct

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Question 9 of 10

9. Question

A company targets a pre-tax profit of $60,000. The product sells for $100, variable costs are $60, and fixed costs total $200,000. What sales revenue is required to meet the target?

$650,000
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$500,000
Correct Incorrect Correct answer

$260,000
Correct Incorrect Correct answer

$433,333
Correct Incorrect Correct answer

Correct

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Question 10 of 10

10. Question

A company has a Margin of Safety of 25% and current sales of $800,000. What are its breakeven sales?

$200,000
Correct Incorrect Correct answer

$600,000
Correct Incorrect Correct answer

$1,000,000
Correct Incorrect Correct answer

$550,000
Correct Incorrect Correct answer

Correct

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Next: CMA Part 2 Practice Exam 3

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CMA Part 1

Practice Exam 1
Practice Exam 2
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Practice Exam 4
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Practice Exam 6
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Practice Exam 8
Practice Exam 9
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CMA Part 2

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Practice Exam 2
Practice Exam 3
Practice Exam 4
Practice Exam 5
Practice Exam 6
Practice Exam 7
Practice Exam 8
Practice Exam 9
Practice Exam 10

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