Bayan Fromarrcr Serge Mpolime O 03 CFA WORKSHOP (AF 124) Ciclo 2024-02 Profesores: John Paul Lopez, Carlos Arias Duracién: 90 minutos. 1. Executive compensation and bonuses are most likely consistent with the interests of shareholders if they are: 4 « A, highly volatile over time. aligned with the company’s strategy. + C. sufficiently high relative to the company's competitors. 2. Happy S.A. sells beer for $7 a bottle. The beer's variable cost per bottle is $4. Happy has. fixed operating costs of $3,500 and fixed financing costs of $5,000. What is Happy's breakeven quantity of sales, in units? 2,833. B. 1,167. ©. 1.877. 3. If Happy's sales increase by 7.5%, Happy’s EBIT increases by 13.7%. If Happy's EBIT increases by 9.3%, Happy's EPS increases by 11.9%. Happy's degree of operating leverage (DOL) and degree of total leverage (DTL) are closest to: +9¢1.3 DOL and 2.3 DTL.+ B.1.8 DOL and 1.3 DTL. C. 1.8 DOL and 2.3 DTL.» 4, Jayco, Inc., sells 20,000 units at a price of $9 per unit. Jayco’s fixed costs are $9,000, interest expense is $3,000, variable costs are $6 per unit, and EBIT is $25,000. Jayco's degree of operating leverage (DOL) and degree of financial leverage (DFL) are closest to: A. 1.18 DOL and 1.67 DFL. B. 1.18 DOL and 1.14 DFL. 14.67 DOL and 1.14 DFL. 5, The cost of an intangible asset is least likely to be amortized if the asset: {. A. has a finite life and was purchased. ‘ is an acquired patent.- as an indefinite life. ses its development costs while Kanye West 6. Taylor Swift Company immediately expen: \ Company capitalizes its development costs. All else equal, Kanye West Company will: report lower total assets than Taylor Swift Company. * «& report lower operating cash flow than Taylor Swift Company. ‘C. report lower asset turnover than Taylor Swift Company. (Scanned with Bcamscanner7. In the early years of an asset’ lfo, a fimn using the double-deciining balance method, as compared to a firm using straight-line depreciation, will report higher: / Srsepreciation expense. 8. shareholder's equity. C. net income. 8. Which of the following statements is true regarding US GAAP accounting rules: A. The revaluation model for long-lived assets is permitted. FB Mre cost model for long-lived assets is required. # An impairment loss can be reversed for any type of long-lived asset at any time. 9, Permanent differences: \ A arise when a reversal of a DTA/ DTL is expected. - result from expenses that are not tax-deductible. te corporate governance issues 10. A firm recently recognized a $25,000 loss on the sale of machinery used in its manufacturing operation, The original cost of the machinery was $180,000 and the accumulated depreciation at the date of sale was $65,000. What amount did the firm receive from the sale? A.$115,000. $140,000. $90,000. 11. Metallurgy, Inc., reported depreciation expense of $10 million fer the most recent year. If ‘end-of year gross PP&E and accumulated depreciation were $200 million and $100 million, the estimated remaining useful life of PP&E is closest to: 10 years. B. 15 years. C. 20 years. 12. Which of the following statements is most a ccurate? The difference between taxes zo payable for the period and the tax expense recognized on the financial state ments results from differences: A in management control. B, between basic and diluted earnings. » « between financial and tax accounting. 13, the tax base of an asset is below the asset's carrying value and a reversal is expected in the future: A. a deferred tax asset is created. deferred tax liability is created. C neither a deferred tax asset nor a deferred tax lability is created. . Use the following data to answer Questions 14 through 17 ful life and no salvage value. A firm acquires an asset for $120,000 with a 4-year us 7 + three years on a straight-line (SL) basis for tax The firm will depreciate the asset over ‘ C purposes and over four years on a SL. basis for financial reporting purposes. The asset will generate $50,000 of cash flow for all four years. The tax rate is 30% each year. B CamScanner14. The tax base of f year 1 ‘ base ‘ f the asset at the end of year 1 is: 15. The car A se peat Valu of the assot a the end of year 1 is $90,000. $60,000. 16. At the en : Keekas, may yoor 1, the fir's balance heet will report a deferred tax: Basset of $3,000. liability of $3,000. 17. A firm has a deferred tax liability that results from accelerated doy )preciation for tax purposes. The DTL is expected to reverse in the foreseeable becgooee. The OT. emopeciad & fable future. How should the liability ould be treated as equity at its full value. B. It should be treated as a liability at its full value. C. tt should be treated as a valuation allowance. | 48.Which one of the following statements is most accurate? An increase in the tax rate atthe beginning of the accounting period will: not affect the income tax expense. Rincrease a defered tax asset.+ C. reduce a deferred tax liability. 19. fa company purchases an asset with future economic benefits that are highly uncertain, the company should: ‘A expense the purchase. ' B. use straightline depreciation. ‘an accelerated depreciation method. 9 Use the following data to answer Questions 20” through 23 ae mn igsues a $25 milion bond with a 6% coupon rate, 5-year maturi payments when market interest rates are 4%, ity, and annual interest 20. The bond can be classified as a: LZ siscourt bond. , B. par bond. C. premium bond. ~ 21. Total of all cash payments to the bondhol ‘A, $6,250,000. - X82. '362,955.4 ‘C. $31,250,000. Iders is: 22. The initial book value of the bonds Is: 1 A$26,112,955+ B,$23,661,279. C £575,000,000." B CamScannerA. $1,000,000, B, $1,260,000. FEr$1044,618. 24. Tha book value of the bonds at th aa book val yond at the and of the first year yall be: J ‘8. $26,318,473, C. $25,205,482, « ae the following data for the next thrae questions (26, 20 and 27) $600,000 Val Costs: $300,000 Fixed Operating Costs: $100,000 Interest Expense: $20,000 25. Using the data provided, calculate the Degree of Operating Leverage (DOL). Assume that DOL Is calculated as the percentage change In operating Income (EBIT) for a 1% change in sales, A256 + 8.32 C.20. 26. Using the data provided, calculate the Degree of Financial Leverage (DFL), Assume that DFL is calculated as the percentage chango in operating income (EBIT) for a 1% change in sales. A.3.45 _ 8.1.75 GZ. 1.25" 27. Using the data provided, calculate the Degree of Total Leverage (DTL), Assume that DTL is calculated as the percentage change in operating Income (EBIT) for a 1% change in sales. A, 2.50 3.156 C. 1.25 28. Which could work agains shareholder's long-term interest? A. Board members work as a consultant for the company , B, The CEO is also the Chaiman of the Board + Both situations could work against shareholder's long term interest. 29, Which of the following may be considered characteristics of a good board? X _% Board members are not allowed to meet without managers present / 23. The interest expanse reported by the issuar al the ant of the fat yaar vil he B. Chairman of the board is a former CEO of the company C. Being able to hire specialized consultants , 30.Which is a sign of low quality earnings aa aes is consistent with earnings increase A. Operating cash flow increase over time .4 Be Company gross margins are very different from other companies from the Industry * C. Both signal low quality earnings 5 (Scanned with Bcamscanner