M.A.S.

Quick Reviewer (Problem Solving) 1

2020 ed. MAS
a. 15.63
1. During the past five years, Pledge b. 16.67
Company had consistently paid 50% of c. 17.50
earnings available to common as d. 20.00
dividends. Next year, the company
projects its net income, before the 5. Return on sales was at 12.5%, asset
P1.2 million preferred dividends, at turnover was only 0.75 and the
P6M. present debt ratio is 0.40. If the
company wants the profit margin
The capital structure is maintained raised to 15%, asset turnover to be
at: maintained, and return on equity to
Debt 25.5% 150% of the present level, what must
Preferred Stock 15.0% be the debt ratio if the amount of
Common Equity 60.0% equity will remain the same?
a. 0.52
What is the retained earnings break- b. 0.68
point next year? c. 0.61
a. P5.76M d. 0.72
b. P4.8M
c. P4.0M 6. Para Company’s stock is expecting to
d. P6.0M generate a dividend and terminal
value one year from now of P57. The
2. The expected next year’s after-tax stock has a beta of 1.3, the risk-
income to be P7,500,000 with a debt free interest rate is 6%, and the
ratio at 40%. The company has expected market return at 11%. What
P6,000,000 of profitable investment should be the equilibrium price of
opportunities and it wish to investors’ stock in the market now?
maintain the debt ratio. According a. 50.67
to the residual dividend policy, b. 43.85
what is the expected dividend payout c. 53.77
ratio next year? d. 41.22
a. 52%
b. 75% 7. What is the current price of a share
c. 48% of stock when last year’s dividend
d. 25% was P3.00, the growth rate is 6%,
and the investor’s required rate of
3. Find the degree of financial return is 12%?
leverage for a firm with EBIT of a. 25.00
P6M, fixed cost of P3M, interest b. 26.50
expense of P1M, preferred stock c. 50.00
dividends of P0.8M, and a 40% tax d. 53.00
rate.
a. 6.0 8. What is the current price of a share
b. 9.0 of stock when the current dividend
c. 1.43 is P4.75, growth rate at 7%, and
d. 1.64 required rate of return is 11%?
e. a. 118.75
b. 43.16
4. A firm is expected to generate P1.5M c. 46.20
in operating income and pay P250,000 d. 127.06
in interest. Ignoring taxes, this
will generate P12.50 earnings per
share. How much will be the EPS if
operating income increases to P2.0M?

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M.A.S. Quick Reviewer (Problem Solving) 2
2020 ed. MAS
9. Dividend 2.28 14. Rara Company is doing a project. The
P/E 19.00 optimistic time to complete is 7
Close 75.25 weeks, most likely time is 13 weeks,
and the pessimistic time is 16
Calculate the dividend payout weeks. Using PERT, what is the
a. 57.6% expected time for this activity?
b. 25.3% a. 6 weeks
c. 12.0% b. 7 weeks
d. 3.0% c. 12.5 weeks
d. 14weeks
10. The current yield on a bond worth
P900 with a par value of P1,000 and 15. A company has a target total labor
a coupon rate of 10% is: cost of P3600 for the first four
a. 10.00% batches of products. Labor rate is
b. 11.11% P10/hour. If the company expects an
c. 12.05% 80% learning curve, how many hours
d. 9.75% should the 1st batch take?
a. 360
11. The Wind Company’s last dividend was b. 140.63
P3.00; growth rate is 6% and the c. 57.6
stock now sells for P36. New stock d. 230.4
can be sold to net the firm P32.40
per share. What is the cost of new 16. The first batch of product will take
common stock? 40 hours to complete. A 90% learning
a. 14.83% curve is expected. If labor rate is
b. 15.81% P15/hour, the target labor cost for
c. 15.26% four batches is
d. 9.69% a. P600
b. P2,160
12. A company’s stock is currently c. P1,944
selling for P120 per share. They d. P2,400
expect to earn P10.80 per share and
pay a year-end dividend of P7.20. 17. Simile Inc. has a total annual cash
Investors require a 9% return. If requirement of P9.075M which are to
the company reinvest retains be paid uniformly. Simile has the
earnings in projects whose return is opportunity to invest the money at
equal to the stock’s expected rate 24% per annum. The company spends,
of return, what will be next year’s on average, P40 for every cash
EPS? conversion to marketable securities.
a. 11.12 What is the optimal cash conversion
b. 10.80 size?
c. 7.42 a. P 60,000
d. 11.77 b. P 55,000
c. P 45,000
13. What is the required rate of return d. P 72,500
for a security with beta of 0.8 when
the market return is 12%, real rate 18. What is the effective rate if a
of return is 3%, and the expected company borrows P200,000 on a 6%
inflation premium is 2%? discount loan with a 10%
a. 17.8% compensating balance for 3 months?
b. 8.6% a. 7.14%
c. 10.6% b. 6.00%
d. 12.6% c. 6.78%
d. 6.44%

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M.A.S. Quick Reviewer (Problem Solving) 3
2020 ed. MAS
23. France Company provides the
19. A corporation estimates its total following information based on its
annual cash disbursement of accounting records:
P3,251,250 which are to be paid
uniformly. They have the opportunity Current assets 2,000,000
to invest it at 9% per annum. The Noncurrent assets 7,000,000
company spends on average P25 for Current liabilities 1,000,000
every cash conversion. What is the Noncurrent liabilities 4,000,000
opportunity cost of keeping cash in Pretax operating profit 1,500,000
bank account? Pretax cost of equity 15%
a. P 3,825 Pretax cost of debt 5%
b. P 1,912 Tax rate 40%
c. P 4,190
d. P 188 The carrying amounts and market
values of above amounts do not
20. A company sells on terms 3/10, net differ significantly. What is France
30. Total sales for the year are Company’s economic value added
P900,000. 40% of the customers pay (EVA)?
on the 10th day; while the other 60% a. 180,000
pay, on average, 45-days after their b. 130,000
purchase. What is the average amount c. 200,000
of receivables? d. 150,000
a. 70.0k
b. 77.5k 24. Pullman carries a part. Demand for
c. 77.2k this is 4,000 units per year; order
d. 67.5k costs amount to P30 per order, and
holding costs total P1.50 per unit.
21. Big Hit Corp. is offered trade Pullman currently places four orders
credit terms of 3/15, net 45. The per year with its suppliers.
firm doesn’t take advantage of the
discount and pays after 67 days. Management is considering the
Using a 365-day year, find the implementation of an EOQ model. By
nominal annual cost of not taking how much will the company save by
the discount. adopting the EOQ model?
a. 18.2% a. 230
b. 21.71% b. 250
c. 23.48% c. 270
d. 26.45% d. 290

22. What is the EOQ if a firm sells 25. You borrowed P10,000 from a bank at
32,000 units per year, cost per a 10% nominal, or stated, rate for a
order is P200.00 and the carrying one-year loan. What is the effective
cost is P0.80 per unit? interest rate is it’s a discount
a. 2,000 units loan?
b. 4,000 units a. 10.00%
c. 8,000 units b. 11.11%
d. 16,000 units c. 12.45%
d. 14.56%

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M.A.S. Quick Reviewer (Problem Solving) 4
2020 ed. MAS
26. What is the inventory conversion Ordering cost P250
period of a firm with annual COGS of Average daily usage 80 units
P8 million, P1.5 million in average Lead time 9 days
inventory, and a cash conversion Economic order quantity 3.5K units
cycle of 75 days?
a. 6.56 days What is the company’s safety stock?
b. 18.75 days a. 900 packages
c. 52.60 days b. 90 packages
d. 67.50 days c. 180 packages
d. 720 packages
27. A company has P5,000,000 inventory;
P2,000,000 accounts receivable; 31. A proposal to purchase a new machine
average daily sales of P100,000; is being considered. The new machine
accounts payable of P1,500,000; and would increase production and
average daily purchases of P50,000. revenues. The relevant data
What is the length of the cash associated with the new machine is
conversion period? given below:
a. 20 days
b. 30 days Cost P1,200,000
c. 40 days Useful life 10 years
d. 50 days Annual cash inflows P450,000
Operating expenses P26,000
28. The normal operating cycle is 150 Salvage value P80,000
days while payable turnover is 6
times. How many cash conversion The expected annual cash inflows
cycles are there within a 300-day given above are the only revenue
year? that the new machine will generate.
a. 6 The operating expenses above do not
b. 4 include the annual depreciation of
c. 3 the new machine. The company uses
d. 5 straight-line method of depreciation
to depreciate. Compute the
29. ABC invested P400,000 in a five-year accounting/simple rate of return.
project at the beginning of year 1. a. 23%
ABC estimates that the annual b. 26%
savings from this project will c. 29%
amount to P130,000. The P400,000 of d. 32%
assets will be depreciated over
their five-year life on the 32. A company is planning to purchase a
straight-line basis. On investments Wheel Loader. It can be purchased
of this type, ABC required rate of for P150,000. It will reduce the
return is 12%. What is the present annual cost by P25,500 and increase
value of the project? annual operating expenses by P4,500.
a. 57,000 The useful life of the Wheel Loader
b. 250,000 is 20 years with a salvage value of
c. 36,000 P30,000. Company uses straight line
d. 68,000 method of depreciation. Compute the
average investment of the asset.
30. The purchasing agent responsible for a. 90,000
ordering cotton underwear for Abaca b. 120,000
retail Stores has come up with the c. 150,000
following information: d. 180,000
Maximum daily usage 100 units
Carrying cost per unit P5

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M.A.S. Quick Reviewer (Problem Solving) 5
2020 ed. MAS
33. Refer to #32, compute accounting 38. Actual Overhead is P14,000 for the
rate of return of wheel loader using year. The company applied overhead
average investment approach. of P13,400. If the overhead budgeted
a. 14.89% for the standard hours allowed is
b. 19.42% P15,600, the overhead controllable
c. 16.67% variance is
d. 15.23% a. P 600 F
b. P 2,200 UF
34. Darf Company applies overhead on the c. P 1,600 F
basis of direct labor hours. 2 d. P 1,600 UF
direct labor hours are required for
each product unit. Other data are 39. What is the dividend yield if a
below: price earnings ratio of 10, EPS of
P2.20, and a pay-out ratio of 75%?
Planned production 9,000 units a. 25%
Budgeted Overhead P 135,000 b. 22%
Actual DL hours 17,200 c. 7.5%
Actual production 8,500 units d. 10%
Actual Variable OH P 108,500
Actual fixed OH P 28,000 40. If a company has current assets of
P200,000, including inventory of
Budgeted overhead is 20% fixed cost. P80,000 and a quick ratio of 2:1,
The variable overhead spending what is the value of the company’s
variance is current liabilities?
a. P 5,300 UF a. 100,000
b. P 1,200 UF b. 140,000
c. P 6,300 UF c. 240,000
d. P 6,500 UF d. 60,000

35. Variable overhead efficiency Given the following data for # 41 & 42
variance is
a. P 5,300 UF Net Sales P1.8M
b. P 1,500 UF Cost of goods sold P1.08M
c. P 1,200 UF EBIT P405,000
d. P 6,500 UF Net Income P195,000
Total stockholder’s equity P750,000
36. Fixed overhead budget variance Total Assets P 1M
a. P 6,300 UF
b. P 1,500 UF Cash flow from operating activities
c. P 2,500 UF amounted to P25,000 for the period.
d. P 1,000 UF
41. Return on investment is
37. Fixed overhead volume variance a. 22.5%
a. P 750 UF b. 26.5%
b. P 1,500 UF c. 19.5%
c. P 2,500 UF d. 40.5%
d. P 1,000 UF
42. Cash flow margin is
a. 1.4%
b. 2.5%
c. 10.8%
d. 12.8%

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M.A.S. Quick Reviewer (Problem Solving) 6
2020 ed. MAS
43. During the year, a company’s net
income is P60,000. Next year, it has 48. The TXT Company is projecting an
a capital budget of P80,000. If the annual dividend growth rate for the
company’s plowback ratio is 30%, how foreseeable future of 9%. The most
much external funding is needed for recent stock paid was P3.00 per
the capital investment project? share. New common stock can be
a. 80,000 issued at P36 each. Using the
b. 62,000 constant growth model, what is the
c. 56,000 approximate cost of capital for
d. 98,000 retained earnings?
a. 9.08%
44. At the end of year 1, Jimin’s total b. 17.33%
assets was P500,000. Next year, it c. 18.08%
earned net income of P30,000 and d. 19.88%
paid dividends of P10,000. What is
the company’s internal growth rate? 49. Namjoon Services is interested in
a. 1% estimating the WACC. The company has
b. 4% bonds outstanding that mature in 26
c. 5% years with an annual coupon of 7.5%
d. 9% and face value of P1,000 and can be
sold in the market today for P920.
45. Produce X 101 had sales of P300,000 Additional information:
in 2019 and the price index for its Risk-free rate 6%
industry is expected to increase Market risk premium 5%
from 300 in 2019 to 320 in 2020. If Beta 1.2
sales in 2020 is exactly P320,000, Tax rate 40%
he company’s real growth rate is Effective Interest Rate 8.257%
a. 0% The company’s target capital
b. 20% structure is 70% equity. They use
c. 6.67% the CAPM to estimate the cost of
d. Negative growth rate equity and do not include flotation
cost as part of its cost of capital.
46. How much should the 2020 sales of What is Namjoon’s WACC?
Produce X 101 be in order to achieve a. 9.75%
a real growth rate of 30%? b. 9.39%
a. 416,000 c. 10.87%
b. 365,625 d. 9.88%
c. 390,000
d. 320,000 50. Black Pink manufactures a product
with a unit variable cost of P20 and
47. The following information relates fixed product cost of P150,000. They
to V Company: use a normal activity of 10,000
Break-even point P312,500 units. They began the year with no
Fixed Expenses P250,000 inventory, produced 12,000 units,
Net operating income P150,000 and sold 7,500 units. What is the
unit cost under variable costing?
What is V’s margin of safety? a. 20
a. 62,500 b. 33
b. 187,500 c. 35
c. 100,000 d. 40
d. 212,500

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M.A.S. Quick Reviewer (Problem Solving) 7
2020 ed. MAS
51. Based on #50, compute the product
cost under absorption costing. 57. The following information pertains
a. 20 to operations during the month of
b. 33 May:
c. 35
d. 40 Process time 8.0 hours
Inspection hours 1.5 hours
52. Itzie had net income of P85,500 Waiting time 1.5 hours
using variable costing and P90,000 Move time 1.5 hours
using absorption costing. Total Units per batch 20 units
fixed manufacturing overhead cost
was P150,000, and production was The manufacturing cycle efficiency
100,000 units. How did the inventory is:
level changed during the year? a. 72.7%
a. 3,000 units increase b. 36%
b. 3,000 units decrease c. 64%
c. 4,500 units increase d. 76%
d. 4,500 units decrease
58. Refer to #57, the throughput time
53. A banking system has a reserve ratio is:
of 20%. A change in the reserve of a. 12.5 hours
P1,000,000 can increase its total b. 8.0 hours
demand deposit by c. 4.5 hours
a. 5,000,000 d. 9.5 hours
b. 1,000,000
c. 800,000 For items # 59-63
d. 200,000 The following data are presented to
you:
54. The expected rate of return for the Waiting time from orders
stock of HK Co. is 20%, with a placed to start of
standard deviation of 15%. The production 6 days
expected return for the stock of Waiting time from start of
Taiwan Co. is 10%, with a standard production to completion 2 days
deviation of 9%. What is HK Co.’s Process time 1 week
stock coefficient of variation? Move time 4 days
a. 75% Inspection time 1 day
b. 90%
c. 33% The company operates seven days a
d. 11% week.

55. Using the information on #54, what 59. What is the delivery cycle time?
is the coefficient of variance of a. 20 days
Taiwan Co.’s stock? b. 2 weeks
a. 75% c. 8 days
b. 90% d. 6 days
c. 33%
d. 11% 60. Total manufacturing cycle time
a. 1 week
56. Based on # 54, which stock is b. 8 days
riskier? c. 2 weeks
a. Taiwan Co. d. 20 days
b. HK Co.
c. Both
d. None

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M.A.S. Quick Reviewer (Problem Solving) 8
2020 ed. MAS
61. Value-added production time 67. Suga has a new machine with a ten-
a. 1 day year useful life. Using a 12%
b. 1 week required rate of return, the net PV
c. 14 days of cash flow from cost is a
d. 20 days P282,500. How much should be the
annual net cash inflows to make this
62. Manufacturing cycle efficiency an acceptable investment?
a. 12.5% a. P 20,000
b. 35% b. P 28,250
c. 50% c. P 35,000
d. 5% d. P 50,000

63. Delivery cycle efficiency 68. SM Entertainment and JYP are major
a. 35% competitors that produce substitute
b. 50% products. If the coefficient of
c. 12.5% cross-elasticity of demand for SM’s
d. 5% product with respect to the
competitor’s product is 2.00 and the
64. J-hope has P8 billion in assets, tax competitor’s price decrease its
rate is 40%, the company’s basic price by 5%, what is the expected
earning power ratio of 12%, and effect on demand of SM’s product?
return on assets is 3%. What is J- a. 5% increase
hope’s times interest earned ratio? b. 5% decrease
a. 2.25 c. 10% increase
b. 1.71 d. 10% decrease
c. 1.00
d. 1.33 69. If an increase in government
purchases of goods and services of
65. Last year, Jin’s total sales were P1 P20M causes the equilibrium GDP to
million, and P250,000 of it were on rise by P 80M, and if total taxes
credit. During the year, the average and investment are constant, the
accounts receivable is P41,096. Next marginal propensity to consume out
year, sales and the day’s sales of disposable income is
outstanding will both increase by a. 0.75
50%. If the resulting increase in b. 0.25
accounts receivable must be financed c. 1.25
externally, how much external d. 4.00
funding will Jin need? (use 365-day
year) 70. Given the following units and cost
a. 41,096 data:
b. 51,370 Month Units Total Cost
c. 47,359 April 18 15,600
d. 106,471 May 19 15,200
June 15 14,600
66. A project requires an initial July 11 13,200
investment of P70,000 and has a August 11 12,800
project profitability index of September 48 72,500
0.932. the PV of the future cash October 17 13,700
inflows from this project is: Calculate the annual fixed cost
a. P 65,240 using the high-low method
b. P 36,231 a. 100,000
c. P 135,240 b. 120,000
d. None of the above c. 114,000
d. 140,000

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M.A.S. Quick Reviewer (Problem Solving) 9
2020 ed. MAS
71. Aberwald Corporation expects to c. 2.00
order 126,000 units next year and it d. 1.00
will use this uniformly. Fixed
ordering costs are P200 per order; 75. Using the data above, compute the
the purchase price per unit is P25; payback reciprocal.
and the firm’s inventory carrying a. 35.84%
costs is equal to 20 % of the b. 23.98%
purchase price. If Aberwald holds a c. 31.27%
safety stock equal to a 30-day d. 26.67%
supply, what is its average
inventory level? (360-day year) 76. An investment project has the
a. 12,088 following characteristics:
b. 3,175
c. 15,750 Initial Investment 500,000
d. 8,124 Additional investment in
working capital 10,000
72. Lauterbach Corporation uses no debt, Annual Cash flow
its beta is 1.10, and tax rate is Before income tax 140,000
40%. However, the CFO is Yearly tax depreciation 90,000
considering moving to a capital Terminal value 50,000
structure with 30% debt and 70% Cost of capital 10%
equity. If the risk-free rate is Income tax rate 30%
5.0% and the market risk premium is Investment life 5 years
6.0%, by how much would the capital
structure shift change the firm's Assume all cash flows come at the
cost of equity? end of the year. What is the net PV
a. 1.53% of the investment?
b. 1.70% a. 175,000
c. 1.87% b. 58,000
d. 2.05% c. 1,135
d. (12,340)
73. Last year Emery Industries had P450M
of sales and P225M of fixed assets. 77. Relay Corporation Manufactures
However, its fixed assets were used batons. Relay can manufacture
at only 65% of capacity. If the 300,000 batons a year at a variable
company had been able to sell off cost of P750,000 and affixed cost of
enough of its fixed assets at book P450,000. Based on Relay’s
value so that it was operating at predictions, 240,000 batons will be
full capacity, how much cash would sold at a regular price of P5.00
it generate? each. In addition, a special order
a. P74.81 was placed for 60,000 batons to be
b. P78.75 sold at a 40% discount off the
c. P82.69 regular price. The unit relevant
d. P86.82 cost per unit for Relay’s decision
is
74. A car was purchased for P9,000 with a. 1.50
a 6-year life and a P3,000 salvage b. 2.50
value. This will result to an c. 3.00
increase gross revenue of P5,000 per d. 4.00
year, and cost of goods sold by
P2,000 per year. If the tax rate is
30%, compute the payback period
a. 4.50
b. 3.75

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M.A.S. Quick Reviewer (Problem Solving) 10
2020 ed. MAS
78. Variable expenses are 75% of sales.
At sales level of P400,000 and the 82. Yan-tarn Inc. has excess
degree of operating leverage is 8. manufacturing capacity. A special
How much is the fixed cost? job order’s cost sheet includes the
a. 87,500 following applied manufacturing
b. 100,000 overhead cost:
c. 50,000
d. 75,000 Variable Cost 56,250
Fixed Cost 45,000
79. If fixed cost is P 50,000, sales are
at P 325,000 and profit is P 30,000. The fixed cost include a normal
What is the degree of operating P6,800 allocation for in-house
leverage? design costs, although no in-house
a. 1.67 design will be done. Instead, the
b. 2.67 special job will require the use of
c. 9.17 external designers costing P13,750.
d. 6.5 What is the minimum acceptance price
of the job?
80. Yow Inc is a convenient store that a. 63,050
is currently open only Monday b. 70,000
through Sunday. Yow considers c. 101,250
opening every Sunday. The annual d. 108,200
incremental fixed cost of Sunday
openings are estimated at P52,000. 83. Wells Water Systems recently
Salient Company’s gross margin on reported P8,250 of sales, P4,500 of
sales is 20%. Salient estimated that operating costs other than
60% of its Sunday sales to customers depreciation, and P950 of
would be made on other days if the depreciation. The company had no
store were not open during Sundays. amortization charges, it had P3,250
of outstanding bonds that carry a
How much additional weekly sales 6.75% interest rate, and its income
would be necessary for Salient tax rate was 35%. In order to
Company to attain an increase of sustain its operations and thus
P2,400 in weekly operating profit generate sales and cash flows in the
every Sunday? future, the firm was required to
a. 17,000 spend P750 to buy new fixed assets
b. 42,500 and to invest P250 in net operating
c. 30,000 working capital. How much free cash
d. 272,000 flow did Wells generate?
a. P1,770.00
81. Jojo Co. a manufacturer can sell its b. P1,858.50
single product for P660. Below are c. P1,951.43
the cost data for the product: d. P2,049.00

Direct Materials 170

Direct Labor 225
Manufacturing overhead 90

The relevant margin amount under a

theory of constraint analysis is
a. 175
b. 345
c. 490
d. 265

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M.A.S. Quick Reviewer (Problem Solving) 11
2020 ed. MAS
84. Edwards Corp. reported P11,250 of 87. Italy provides the following
sales, P5,500 of operating costs information for its standard
other than depreciation, and P1,250 material cost for one unit of its
of depreciation. The company had no finished product:
amortization charges, it had P3,500
of bonds that carry a 6.25% interest STANDARD:
rate, and its income tax rate was 4 meters @ P2.00/meter = P8/unit
35%. How much was its net cash
flow? Actual data also showed the
a. P3,284.75 following data:
b. P3,457.63
c. P3,831.17 Materials, beg = 10,000 meters
d. P4,032.81 Materials, end = 15,000 meters
Purchases for the year = 220,000
85. NNR Inc.'s balance sheet showed meters
total current assets of P1,875,000 Average purchase price = P 2.50
plus P4,225,000 of net fixed assets.
All of these assets were required in How many finished units were
operations. The firm's current produced if materials quantity
liabilities consisted of P475,000 of variance is computed as P 30,000
accounts payable, P375,000 of 6% unfavorable?
short-term notes payable to the a. 40,000 units
bank, and P150,000 of accrued wages b. 50,000 units
and taxes. Its remaining capital c. 60,000 units
consisted of long-term debt and d. 70,000 units
common equity. What was NNR's total
investor-provided operating capital? 88. Holoko Co uses a standard costing
a. P4,694,128 system in the manufacturing of their
b. P4,941,188 plastic toys. Each toy contains two
c. P5,201,250 bundles of plastic. However, a 20%
d. P5,475,000 direct material spoilage calculated
on input quantitates occurs during
86. To finance the construction of a new the manufacturing process. The cost
plant, Benefield Inc. must raise an of the plastic is P3 per bundle. The
additional P10,000,000 of equity standard direct material cost per
capital through the sale of common unit of plastic toy is
stock. The firm currently has an a. 4.80
EPS of P5.40 and a P/E ratio of 10, b. 6.00
with 1,200,000 shares outstanding. c. 7.20
If the firm wants its ex-rights d. 7.50
price to be P50, what subscription
price must it set on the new shares?
a. P29.55
b. P33.78
c. P39.28
d. P41.80

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M.A.S. Quick Reviewer (Problem Solving) 12
2020 ed. MAS
89. Cuco is an analyst in the accounting Assets 2010
department of JBL. Cuco gathered the Cash and securities P1,554.0
following data on the stock Accounts receivable 9,660.0
portfolio portion of JBL’s endowment Inventories 13,440.0
pool: Total current assets P24,654.0
Amount Expected Net plant and equipment 17,346.0
Security Invested Return Beta Total assets P42,000.0
A P1,000,000 10% 0.80
B 250,000 15% 1.40 Liabilities and Equity
C 3,000,000 8% 0.95 Accounts payable P7,980.0
D 450,000 12% 0.50 Notes payable 5,880.0
E 2,500,000 4% 1.00 Accruals 4,620.0
Based on the above data, the Total current liabilities P18,480.0
expected return on the stock Long-term bonds 10,920.0
portfolio to be Total debt P29,400.0
a. 7.4% Common stock 3,360.0
b. 9.8% Retained earnings 9,240.0
c. 49.0% Total common equity P12,600.0
d. 58.6% Total liabilities and equity P42,000.0

90. Tumayi Corporation sells bags and

hankies at a sales ratio of 3:7 Other data:
respectively and with the following Shares outstanding (millions) 175.00
characteristics: Common dividends P509.83
Bag Hankies Int rate on notes payable & L-T bonds 6.25%
Contribution Income tax rate 35%
45% 70% Year-end stock price P77.69
margin ratio
Fixed Cost P300,000 P875,000
91. What is the firm's EBITDA coverage?
a. 3.29
Tumayi’s breakeven point in peso is
b. 3.46
a. 1,840,000
c. 3.64
b. 1,880,000
d. 3.82
c. 1,921,778
d. 1,965,455
92. What is the firm's BEP?
a. 6.00%
The balance sheet and income statement
b. 6.32%
shown below are for Pettijohn Inc. Note
c. 6.65%
that the firm has no amortization charges,
d. 6.98%
it does not lease any assets, none of its
debt must be retired during the next 5
93. What is the firm's profit margin?
years, and the notes payable will be rolled
a. 1.40%
over.
b. 1.56%
c. 1.73%
Income Statement (Millions of P) 2010
d. 1.93%
Net sales P58,800.00
Operating costs except depr’n P54,978.0
Depreciation P1,029.0
94. What is the firm's dividends per
Earnings bef int and taxes (EBIT) P2,793.0
share?
Less interest 1,050.0
a. P2.62
Earnings before taxes (EBT) P1,743.0 b. P2.91
Taxes P610.1 c. P3.20
Net income P1,133.0 d. P3.53

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M.A.S. Quick Reviewer (Problem Solving) 13
2020 ed. MAS
95. What is the firm's cash flow per a. P 764
share? b. P 943
a. P10.06 c. P1,048
b. P10.59 d. P1,164
c. P11.74
d. P12.35 102. The Table Top Model Corp.
produces three products. “Tic,”
96. EPS “Tac.”, and “Toc.” The owner
a. P5.84 desires to reduce production load to
b. P6.15 only one product line due to
c. P6.47 prolonged absence of the production
d. P6.80 manager. Depreciation expense
amounts to P600,000 annually. Other
97. P/E Ratio fixed operating expenses amount to
a. 12.0 P660,000 per year. The sales and
b. 12.6 variable cost data of the three
c. 13.2 products are (000’s omitted)
d. 13.9 TIC TAC TOC
Sales 6,600 5,300 10,800
98. Book Value per Share Variable Cost 3,900 1,700 8,900
a. P61.73
b. P64.98 Which product must be retained and
c. P68.40 what is the opportunity cost of
d. P72.00 selecting such product line?
a. Retain product “Tac”;
99. What is the firm's market-to-book opportunity cost is P4.6M
ratio? b. Retain product “Tac”;
a. 0.56 opportunity cost is P3.14M
b. 0.78 c. Retain product “Tic”;
c. 0.92 opportunity cost is P4.04M
d. 1.08 d. Retain product “Toc”;
opportunity cost is P4.84M
100. firm's equity multiplier
a. 3.33 103. The data for an investment
b. 3.50 center is given below.
c. 3.68 1/1/18 12/31/18
d. 3.86 Current Assets 400,000 600,000
Plant Assets 3,000,000 4,000,000
101. Data on Wentz Inc. for 2008 Idle Plant 250,000 330,000
are shown below, along with the Land held for 1,200,000 1,200,000
payables deferral period (PDP) for future use
the firms against which it The controllable margin is
benchmarks. The firm's new CFO P960,000. What is the return on
believes that the company could investment for the Center for 2002?
delay payments enough to increase a. 25%
its PDP to the benchmarks’ average. b. 24%
If this were done, by how much would c. 23%
payables increase? Use a 365-day d. 22%
year.
Cost of goods sold = P75,000
Payables = P5,000
Payables deferral period = 24.33
Benchmark payables deferral period =
30.00

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M.A.S. Quick Reviewer (Problem Solving) 14
2020 ed. MAS
104. Bavaria's budget for variable 106. Based on the above
overhead and fixed overhead revealed information, what is the F-200’s
the following information for an expected net present value?
anticipated 40,000 hours of a. -P6,678
activity: variable overhead, b. -P3,251
P348,000; fixed overhead, P600,000. c. P15,303
d. P20,004
The company actually worked 43,000
hours, and actual overhead incurred 107. A firm has determined its
was: variable, P365,500; fixed, optimal capital structure, which is
P608,000. composed of the following sources
and target market value proportions:
How much is the budget under static
and flexible respectively? Long-term debt 30%
a. 948,000 ; 973,500 Preferred stock 5%
b. 973,500 ; 974,100 Common stock equity 65%
c. 948,000 ; 974,100
d. 974,100 ; 948,000 Debt: The firm can sell a 20-year,
P1,000 par value, 9 percent bond for
105. Nico Trading Corporation is P980. A flotation cost of 2% of the
considering issuing long-term debt. face value would be required in
The debt would have a 30 year addition to the discount of P20.
maturity and a 10 percent coupon
rate. In order to sell the issue, Preferred Stock: The firm has
the bonds must be underpriced at a determined it can issue preferred
discount of 5 percent of face value. stock at P65 per share par value.
In addition, the firm would have to The stock will pay an P8.00 annual
pay flotation costs of 5% of face dividend. The cost of issuing and
value. The firm’s tax rate is 35 selling the stock is P3 per share.
percent. Given this information, the
after tax cost of debt for Nico Common Stock: The firm’s common
Trading would be stock is currently selling for P40
a. 7.26%. per share. The dividend expected to
b. 11.17%. be paid at the end of the coming
c. 10.00%. year is P5.07. Growth rate is 8%. It
d. none of the above is expected that to sell, a new
common stock issue must be
Oklahoma Instruments (OI) is considering underpriced at P1 per share and the
project F-200 that has an up-front cost of firm must pay P1 per share in
P250,000. The project’s subsequent cash flotation costs. Additionally, the
flows are critically dependent on whether firm’s marginal tax rate is 40%.
another of its products, F-100, becomes an
industry standard. There is a 50% chance Calculate the firm’s weighted
that the F-100 will become the industry average cost of capital assuming the
standard, in which case the F-200’s firm has exhausted all retained
expected cash flows will be P110,000 at the earnings.
end of each of the next 5 years. There is a. 16.20%
a 50% chance that the F-100 will not become b. 15.36%
the industry standard, in which case the F- c. 14.98%
200’s expected cash flows will be P25,000 d. 13.24%
at the end of each of the next 5 years.
Assume that the cost of capital is 12%.

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M.A.S. Quick Reviewer (Problem Solving) 15
2020 ed. MAS
ANSWER KEY:
108. You have the following data on three
stocks: 1C 41 C 81 C
2A 42 A 82 B
Stock Standard Deviation Beta
A 20% 0.59
3C 43 B 83 A
B 10% 0.61 4C 44 B 84 D
C 12% 1.29 5A 45 A 85 D
6A 46 A 86 B
If you are a strict risk minimizer, you
7D 47 B 87 B
would choose Stock ____ if it is to be held
in isolation and Stock ____ if it is to be 8D 48 C 88 D
held as part of a well-diversified 9A 49 D 89 A
portfolio 10 B 50 A 90 B
a. A; A.
11 B 51 C 91 C
b. A; B.
c. B; A. 12 A 52 A 92 C
d. C; A. 13 C 53 B 93 D
14 C 54 A 94 B
109. Data on Wentz Inc. for 2008 are shown 15 B 55 B 95 D
below, along with the payables deferral
period (PDP) for the firms against which it 16 C 56 A 96 C
benchmarks. The firm's new CFO believes 17 B 57 C 97 A
that the company could delay payments 18 C 58 A 98 D
enough to increase its PDP to the 19 B 59 A 99 D
benchmarks’ average. If this were done, by
how much would payables increase? Use a
20 B 60 C 100 A
365-day year. 21 B 61 B 101 D
22 B 62 C 102 A
Cost of goods sold = P75,000 23 A 63 A 103 B
Payables = P5,000
24 C 64 B 104 C
Payables deferral period (PDP) = 24.33
Benchmark payables deferral period = 30.00 25 B 65 B 105 A
26 D 66 C 106 A
a. P 764 27 C 67 D 107 A
b. P 943
28 C 68 D 108 C
c. P1,048
d. P1,164 29 D 69 A 109 D
30 C 70 C 110 C
110. Firm L has debt with a market value of 31 B 71 A
P200,000 and a yield of 9%. The firm's 32 A 72 B
equity has a market value of P300,000, its
earnings are growing at a rate of 5%, and 33 C 73 B
its tax rate is 40%. A similar firm with 34 A 74 B
no debt has a cost of equity of 12%. Under 35 C 75 D
the MM extension with growth, what is Firm 36 D 76 C
L's cost of equity?
a. 11.4% 37 B 77 D
b. 12.0% 38 C 78 A
c. 12.6% 39 C 79 B
d. 14.0% 40 D 80 A

Ver 1.10 by: Remy Pen.