CENEVAL EGEL Plus Finanzas (EGEL Plus FINAN)

A company has cash of MXN 650,000, marketable securities of MXN 350,000, accounts receivable of MXN 1,200,000 and current liabilities of MXN 2,500,000. What is its cash ratio?

• A0.88
• B0.40
• C0.26
• D0.74

A retailer has net credit sales of MXN 73,000,000, total sales (cash and credit) of MXN 91,250,000 and accounts receivable of MXN 9,000,000. Using a 365-day year, what is its average collection period?

• A44.4 days
• B36.0 days
• C45.0 days
• D8.1 days

A distributor's cost of sales is MXN 36,000,000 and its net sales MXN 48,000,000. It wants to cut days of inventory from 60 to 45 (360-day year). How much cash would this free up?

• AMXN 2,000,000
• BMXN 4,500,000
• CMXN 6,000,000
• DMXN 1,500,000

A company makes credit purchases of MXN 24,000,000 a year, and its cost of sales is MXN 36,000,000. Accounts payable are MXN 3,000,000. Using a 360-day year, what is its average payment period?

• A45 days
• B30 days
• C46 days
• D8 days

A supplier has 68 days of inventory, a 42-day collection period and a 35-day payment period. What is its cash conversion cycle?

• A145 days
• B75 days
• C61 days
• D110 days

How does the operating cycle differ from the cash conversion cycle?

• AThe operating cycle applies to services, and the cash cycle to manufacturing
• BThe operating cycle includes depreciation of fixed assets
• CThe cash cycle subtracts the time suppliers take to be paid
• DThe cash cycle adds bank fees to the operating cycle

A company has net income of MXN 9,000,000, revenue of MXN 60,000,000, total assets of MXN 75,000,000 and equity of MXN 30,000,000. Using the three-factor DuPont model, what are its margin, asset turnover, equity multiplier and ROE?

• A12.0%, 0.80, 2.50; ROE 24.0%
• B15.0%, 0.80, 1.67; ROE 20.0%
• C15.0%, 0.80, 0.40; ROE 4.8%
• D15.0%, 0.80, 2.50; ROE 30.0%

In the five-factor DuPont breakdown of ROE, which factor shows the burden of interest expense?

• AAsset turnover (sales / assets)
• BOperating margin (EBIT / sales)
• CInterest burden (EBT / EBIT)
• DTax burden (net income / EBT)

A telecom company has EBIT of MXN 42,000,000, interest expense of MXN 12,000,000 and a 30% tax rate. What is its times-interest-earned ratio?

• A2.45x
• B3.50x
• C2.50x
• D0.29x

A company's current ratio is 2.4, but its quick ratio is only 0.6. What does this suggest?

• AIts liquidity depends heavily on selling its inventory
• BIt holds excess cash that should be invested
• CIt collects from customers faster than it pays suppliers
• DIt has too much long-term debt in its structure

A company's after-tax operating return on assets is 14%, and it can borrow at an after-tax cost of 8%. If it replaces part of its equity with debt, all else equal, what happens?

• AROE falls, because interest reduces net income
• BROE is unchanged, as in Modigliani-Miller without taxes
• CROE rises, and financial risk also rises
• DROE rises, and financial risk falls

A company's net income has grown strongly for two years, but its operating cash flow has been negative because receivables and inventory keep rising. What should an analyst conclude?

• AThe company is paying more income tax than it legally owes
• BProfits are not becoming cash; earnings quality is doubtful
• CDepreciation charges are too high and hide the true level of profit
• DThe company must be highly liquid, given how much profit it reports

Which budget is normally prepared first in a company's master budget, because the others depend on it?

• AThe cash budget
• BThe production budget
• CThe budgeted balance sheet
• DThe sales budget

A company starts the month with MXN 150,000 in cash, expects receipts of MXN 900,000 and disbursements of MXN 1,050,000, and must keep a minimum balance of MXN 100,000. How much must it borrow?

• AMXN 100,000
• BNothing, because ending cash is not negative
• CMXN 150,000
• DMXN 1,050,000

What is the main feature of zero-based budgeting (presupuesto base cero)?

• AEvery expense must be justified from zero in each period
• BLast year's figures are rolled forward and adjusted for inflation
• CBudgets are set so that the company's planned profit equals zero
• DOnly capital spending is budgeted, while operating costs are left open

What is a rolling (continuous) budget?

• AA budget revised only when sales fall below plan
• BA budget prepared once every five years
• CA budget that adds a new period as each one ends
• DA budget that rolls unspent amounts into the next year

A plant sells auto parts at MXN 450 each, with a variable cost of MXN 270 and fixed costs of MXN 7,200,000 a year. How many units must it sell to earn an operating profit of MXN 1,800,000?

• A40,000 units
• B10,000 units
• C20,000 units
• D50,000 units

Under the Baumol model, a company expects annual cash needs of MXN 20,000,000. Each sale of securities costs MXN 250, and the opportunity cost of holding cash is 10% a year. What is the optimal amount per transfer?

• AMXN 223,607
• BMXN 158,114
• CMXN 31,623
• DMXN 316,228

Under the Miller-Orr model, what should the treasury do when cash reaches the upper limit H?

• ASell securities worth H - Z to add cash
• BBuy securities worth H - Z, bringing cash back to Z
• CDraw on a bank credit line to add working capital
• DBuy fixed assets until cash falls below the lower limit

A project costs MXN 2,000,000 and will generate MXN 200,000 next year, growing 3% a year indefinitely. The cost of capital is 11%. What is its NPV?

• A-MXN 181,818
• BMXN 500,000
• C-MXN 571,429
• DMXN 2,500,000

Why can NPV and IRR rank mutually exclusive projects differently?

• AThey always give the same ranking, whatever the scale
• BIRR assumes reinvestment at the IRR; NPV at the cost of capital
• CNPV assumes reinvestment at the IRR and ignores the time value of money
• DIRR can be calculated only when the initial investment is zero

With a fixed capital budget that cannot fund every positive-NPV project, why rank independent projects by profitability index?

• AIt ignores the timing of cash flows, so the projects can start sooner
• BIt shows value per peso of scarce capital, maximizing total NPV
• CIt always equals the project's IRR, so no discounting is needed at all
• DNPV stops being valid whenever capital markets are imperfect

Which limitations of the IRR does the modified IRR (MIRR) address?

• AIt can be used for projects with no initial investment
• BIt guarantees that every project has a positive NPV
• CIt restates all the cash flows in UDIs automatically
• DOne rate, with reinvestment at the cost of capital

The CETES rate is 10.0%, the expected market return is 15.0% and a share's beta is 1.25. Analysts expect the share to return 18.0%. What do CAPM and the security market line indicate?

• ARequired return 16.25%; the share is undervalued
• BRequired return 18.75%; the share is overvalued
• CRequired return 16.25%; the share is overvalued
• DRequired return 15.00%; the share is fairly priced

A company issues certificados bursátiles at a pre-tax cost of 11.50%. The income tax rate is 30%. What is the after-tax cost of this debt?

• A11.50%
• B16.43%
• C3.45%
• D8.05%

A company's bonds have a market value of MXN 300 million (book value 400 million), and its 25 million shares trade at MXN 28 (book equity 350 million). The pre-tax cost of debt is 11%, the cost of equity 16% and the tax rate 30%. What is the WACC at market values?

• A13.51%
• B11.57%
• C14.50%
• D16.00%

A share sells for MXN 40. The next dividend will be MXN 2.40, and dividends grow 6% a year. Issuing new shares costs 10% of the price. What is the cost of new common equity?

• A12.00%
• B12.67%
• C6.67%
• D12.60%

What is the central claim of Modigliani and Miller's dividend irrelevance theorem?

• AHigh dividends maximize firm value by reducing agency costs
• BIn perfect markets, value depends on investments, not dividends
• CDividends raise the cost of equity because investors prefer gains
• DFirms should pay out all their earnings to prevent hostile takeovers

According to Gordon and Lintner's bird-in-the-hand theory, why do investors value dividend-paying shares more?

• ADividends are fully exempt from every Mexican income tax
• BDividends can legally be paid only out of new debt
• CCapital gains on shares are prohibited under the LGSM
• DDividends now are less uncertain than future gains

Under the signaling hypothesis, why does a share price often rise after an unexpected dividend increase?

• AInsiders use the increase to sell assets before bankruptcy
• BIt signals management's confidence in higher future earnings
• CThe higher dividend removes corporate income tax
• DCreditors must then forgive part of the debt

Compared with a cash dividend of the same amount, what is an advantage of an open-market share repurchase?

• AIt removes the voting rights of all minority shareholders for good
• BIt guarantees that the share price will be higher within a year
• CShareholders choose whether to sell, and fewer shares lift EPS
• DIt increases the paid-in capital shown on the balance sheet

An unlevered firm is worth MXN 500 million. It issues MXN 200 million of permanent debt, and the tax rate is 30%. Under Modigliani-Miller with corporate taxes, what is the levered firm worth?

• AMXN 500 million
• BMXN 700 million
• CMXN 560 million
• DMXN 440 million

What does the trade-off theory of capital structure say about the optimal level of debt?

• AIt balances debt's tax shield against financial distress costs
• BA company should use 100% debt, since all interest is tax-deductible
• CA company should use no debt at all, to avoid any financial risk
• DDebt is irrelevant to value, whatever taxes and bankruptcy costs are

According to the pecking order theory, in what order do companies prefer to finance investments?

• ANew shares first, then debt, then retained earnings
• BDebt first, then new shares, then retained earnings
• CRetained earnings, then debt, then new shares
• DAll three in fixed proportions

Plan A finances an expansion only with shares, for 1,000,000 shares in total. Plan B leaves 600,000 shares and adds debt with annual interest of MXN 2,000,000. The tax rate is 30%. At what EBIT do both plans give the same EPS?

• AMXN 2,000,000
• BMXN 3,333,333
• CMXN 7,142,857
• DMXN 5,000,000

A company can fund MXN 3,000,000 of new equity from retained earnings. Its target structure is 40% debt and 60% equity. At what total amount of new financing does its weighted marginal cost of capital rise?

• AMXN 1,800,000
• BMXN 3,000,000
• CMXN 5,000,000
• DMXN 7,500,000

A share is expected to return 30% in a boom (probability 0.3), 12% in a normal year (0.5) and -10% in a recession (0.2). What are its expected return and standard deviation?

• AExpected 13.0%, standard deviation 13.9%
• BExpected 10.7%, standard deviation 13.9%
• CExpected 13.0%, standard deviation 193.0%
• DExpected 32.0%, standard deviation 13.9%

A portfolio holds 60% in asset X (expected return 14.0%) and 40% in asset Y (expected return 9.0%). What is its expected return?

• A11.5%
• B11.0%
• C23.0%
• D12.0%

Asset A has a standard deviation of 20% and asset B of 30%, and their returns are perfectly negatively correlated (ρ = -1). What weights give a portfolio with zero risk?

• A60% A and 40% B
• B40% A and 60% B
• C50% A and 50% B
• DNone; some risk always remains

In Markowitz portfolio theory, what is the efficient frontier?

• AThe portfolios with the highest dividend yield and zero beta
• BThe line from regressing a share's returns on the IPC index
• CThe debt limit the Ley del Mercado de Valores sets for issuers
• DThe portfolios with the highest return for each level of risk

Portfolio 1 returns 17.0% with a standard deviation of 15.0%. Portfolio 2 returns 14.0% with a standard deviation of 10.0%. The CETES rate is 8.0%. Which has the better Sharpe ratio?

• APortfolio 2 (0.60 vs 0.53)
• BPortfolio 1, because its return is higher
• CBoth are equal at 0.60
• DPortfolio 1 (1.13 vs 1.40)

A fund returned 18.5%. The risk-free rate is 8.5%, its beta against the S&P/BMV IPC is 1.25 and its standard deviation is 20.0%. What is its Treynor ratio?

• A0.50
• B10.0%
• C14.8%
• D8.0%

A manager earned 17.50%. The S&P/BMV IPC returned 14.00%, the risk-free rate is 8.00% and the portfolio's beta is 1.20. What is Jensen's alpha?

• A+3.50%; outperformed
• B+9.50%; outperformed
• C+2.30%; outperformed
• D-2.30%; underperformed

What is the difference between the capital market line (CML) and the security market line (SML)?

• AThe CML uses beta for single shares; the SML uses variance for indices
• BThe CML is used by banks and the SML by insurers
• CThe CML is horizontal and the SML is a parabola
• DCML: efficient portfolios vs total risk; SML: any asset vs beta

Why does capital market theory say investors are rewarded only for systematic risk?

• AUnsystematic risk is covered by IPAB deposit insurance
• BUnsystematic risk can be diversified away at little cost
• CSystematic risk disappears with more than 50 shares
• DAccounting standards forbid unsystematic risk

A 182-day CETES with a face value of MXN 10.00 offers an annual yield (tasa de rendimiento) of 10.00% on a 360-day basis. What is its price?

• AMXN 9.4944
• BMXN 9.0909
• CMXN 9.5238
• DMXN 9.5188

Why is the yield of a CETES always higher than its discount rate for the same price and term?

• AThe yield uses the price paid as its base; the discount rate uses face value
• BThe discount rate uses the price paid as its base; the yield uses face value
• CTax rules add a surcharge to the discount rate
• DThe yield includes a sovereign credit insurance fee

A Bono M has a face value of MXN 100 and an 8.50% annual coupon, paid every 182 days on a 360-day basis. What is each coupon payment?

• AMXN 8.5000
• BMXN 4.2500
• CMXN 4.2384
• DMXN 4.2972