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Chapter 1 Which of the following organization forms for a business
Answer: B Diff: 1 Section: 1.1 The Four Types of Firms Skill: Conceptual Answer: C Diff: 1 Section: 1.1 The Four Types of Firms Skill: Conceptual Copyright © 2014 Pearson Education, Inc. 1 Answer: C Diff: 1 Section: 1.1 The […]
Chapter 10 Common Versus Independent Risk skill Analytical What The
21 25) Using the data provided in the table, calculate the average annual return, the variance of the annual returns, and the standard deviation of the average returns for the market from 2000 to 2009. Answer: Rannual = = = […]
Chapter 10 Historical Returns Stocks And Bonds skill Analytical Assume
1 Corporate Finance, 3e (Berk/DeMarzo) Chapter 10 Capital Markets and the Pricing of Risk 10.1 Risk and Return: Insights from Years of Investor History 1) Which of the following investments offered the lowest overall return over the past eighty years? […]
Chapter 10 The standard deviation for the return on an portfolio
Copyright © 2014 Pearson Education, Inc. 12) The standard deviation for the return on an portfolio of 20 type I firms is closest to: A) 5.25% B) 5.10% C) 15.0% D) 23.0% Answer: B Explanation: B) expected return = .7(20%) […]
Chapter 11 Almost All The Correlations Between Stocks Are
1 Corporate Finance, 3e (Berk/DeMarzo) Chapter 11 Optimal Portfolio Choice and the Capital Asset Pricing Model 11.1 The Expected Return of a Portfolio 1) Which of the following statements is FALSE? A) Without trading, the portfolio weights will decrease for […]
Chapter 11 Assuming that Tom wants to maintain the current volatility
Copyright © 2014 Pearson Education, Inc. 15) Assuming that Tom wants to maintain the current volatility of his portfolio, then the maximum expected return that Tom could achieve by investing in the market portfolio and risk- free investment is closest […]
Chapter 11 Consider an equally weighted portfolio that contains
Copyright © 2014 Pearson Education, Inc. 21) Calculate the variance on a portfolio that is made up of equal investments in Stock Y and Stock Z stock . 21 Answer: Year End Stock Y Realized Return Stock Z Realized Return […]
Chapter 11 The expected return on the precious metals fund is closest
Copyright © 2014 Pearson Education, Inc. 6) The expected return on the precious metals fund is closest to: A) -3% B) 4% C) 1% D) 10% Answer: C Explanation: C) = = = -0.3 ri = rf + × (E[Rp] […]
Chapter 12 Rating The Bondholders Expected Loss Rate
21 Copyright © 2014 Pearson Education, Inc. 22 4) The Market’s average historical excess return is closest to: A) -2.50% B) -3.33% C) -4.33% D) -5.17% Answer: D Explanation: D) excess returnaverage = Year Risk-free Return Market Return Wyatt Oil […]
Chapter 12 The Efficient Portfolio The Portfolio That All
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 12 Estimating the Cost of Capital 12.1 The Equity Cost of Capital Use the following information to answer the question(s) below. Beta Volatility “Eenie” 0.45 20% “Meenie” 0.75 18% […]
Chapter 12 Trucks R’ Us has a market capitalization of $142 billion
Copyright © 2014 Pearson Education, Inc. Use the following information to answer the question(s) below. Consider the following information regarding corporate bonds: Rating AAA AA A BBB BB B CCC Average Default Rate 0.0% 0.1% 0.2% 0.5% 2.2% 5.5% 12.2% […]
Chapter 13 Style based Anomalies And The Market Efficiency Debate skill
Copyright © 2014 Pearson Education, Inc. 11) Portfolio “D”: A) falls below the SML. B) has a negative alpha. C) is overpriced. D) offers an expected return equal to the risk-free rate. Answer: D Diff: 2 Section: 13.6 Style-Based Anomalies […]
Chapter 13 Which of the following stocks represent selling opportunities
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 13 Investor Behavior and Capital Market Efficiency 13.1 Competition and Capital Markets Use the following information to answer the question(s) below. Assume that the CAPM is a good description […]
Chapter 14 B explanation Although Debt Has Lower Cost Capital
Copyright © 2014 Pearson Education, Inc. 26) Assume that in addition to 1.25 billion common shares outstanding, Luther has stock options given to employees valued at $2 billion. The market value of Luther’s non-cash assets is closest to: A) $22 […]
Chapter 14 Based upon the three comparable firms
Copyright © 2014 Pearson Education, Inc. 23) Based upon the three comparable firms, what asset beta would you recommend using for your firm’s new project? 34 Answer: Firm Name Equity Beta Debt Beta Debt to Equity Ratio Percent Equity Percent […]
Chapter 14 Shares Outstanding Million Million Repurchased Million Shares diff
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 14 Capital Structure in a Perfect Market 14.1 Equity Versus Debt Financing Use the following information to answer the question(s) below. Nielson Motors (NM) has no debt. Its assets […]
Chapter 15 If Flagstaff currently maintains a debt to equity
Copyright © 2014 Pearson Education, Inc. 21) If Flagstaff currently maintains a .5 debt to equity ratio, then the value of Flagstaff as an all equity firm would be closest to: A) $80 million B) $100 million C) $73 million […]
Chapter 15 the gain to investors from the tax deductibility of interest
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 15 Debt and Taxes 15.1 The Interest Tax Deduction 1) Which of the following statements is FALSE? A) In general, the gain to investors from the tax deductibility of […]
Chapter 15 The Grant Corporation is considering permanently adding
Copyright © 2014 Pearson Education, Inc. 4) Assume that investors in Google pay a 15% tax rate on income from equity and a 35% tax rate on interest income. If Google were to issue sufficient debt to reduce its taxes […]
Chapter 16 capital markets are perfect except for the existence of corporate
Copyright © 2014 Pearson Education, Inc. Use the information for the question(s) below. You own your own firm and you need to raise $50 million to fund an expansion. Following the expansion, your firm will be worth $75 million in […]
Chapter 16 so that the project has a beta of 0 and a cost of capital
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 16 Financial Distress, Managerial Incentives, and Information 16.1 Default and Bankruptcy in a Perfect Market 1) Which of the following statements is FALSE? A) Equity holders expect to receive […]
Chapter 16 that shareholders expects the change indebt to be permanent
Copyright © 2014 Pearson Education, Inc. 13) Suppose that BBB pays corporate taxes of 35% and that shareholders expects the change in debt to be permanent. Assume that capital markets are perfect except for the existence of corporate taxes and […]
Chapter 17 The date on which the board authorizes
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 17 Payout Policy 17.1 Distributions to Shareholders 1) The date on which the board authorizes the dividend is the: A) declaration date. B) distribution date. C) record date. D) […]
Chapter 17 The tax rates shown are for financial assets held for one year
Copyright © 2014 Pearson Education, Inc. 13) Which of the following equations is INCORRECT? A) Pcum – Pex = Div × B) Pcum – Pex = Div × C) = D) (Pcum – Pex)(1 – τd) = Div(1 – τg) […]
Chapter 18 False a With Perfect Capital Markets All Securities
Copyright © 2014 Pearson Education, Inc. 3) The NPV of this project using the WACC method is closest to: A) $10 million B) $13 million C) $42 million D) $71 million Answer: B Explanation: B) Since this project is totally […]
Chapter 18 which is expected to remain stable, and Nielson’s debt
21 Use the information for the question(s) below. Omicron Industries’ Market Value Balance Sheet ($ Millions) and Cost of Capital Assets Liabilities Cost of Capital Cash 0 Debt 200 Debt 6% Other Assets 500 Equity 300 Equity 12% τc 35% […]
Chapter 18 Which of the following is NOT one of the simplifying
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 18 Capital Budgeting and Valuation with Leverage 18.1 Overview of Key Concepts 1) Which of the following is NOT one of the simplifying assumptions made for the three main […]
Chapter 19 Based upon the average EV/EBITDA ratio of the comparable
1 Corporate Finance, 3e (Berk/DeMarzo) Chapter 19 Valuation and Financial Modeling: A Case Study 19.1 Valuation Using Comparables Use the tables for the question(s) below. Estimated 2005 Income Statement and Balance Sheet Data for Ideko Corporation Year 2005 Year 2005 […]
Chapter 19 The amount of net working capital for Ideko in
Copyright © 2014 Pearson Education, Inc. 11) The amount of net working capital for Ideko in 2007 is closest to: A) $30,510 B) $26,420 C) $22,170 D) $35,195 17 Answer: B Explanation: B) Year 2005 2006 2007 2008 2009 2010 […]
Chapter 2 Luther’s earnings before interest, taxes, depreciation
Copyright © 2014 Pearson Education, Inc. 6) Luther’s quick ratio for 2008 is closest to: A) 0.77 B) 0.87 C) 1.15 D) 1.30 Answer: A Explanation: A) quick ratio = (current assets – inventory)/current liabilities quick ratio = (144.0 – […]
Chapter 2 Which of the following statements regarding the balance sheet
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 2 Introduction to Financial Statement Analysis 2.1 Firms’ Disclosure of Financial Information 1) U.S. public companies are required to file their annual financial statements with the U.S. Securities and […]
Chapter 20 A call option gives the owner the right to buy the asset
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 20 Financial Options 20.1 Option Basics 1) Which of the following statements is FALSE? A) A call option gives the owner the right to buy the asset. B) A […]
Chapter 20 When The Put Option Sufficiently Deep In the money
Copyright © 2014 Pearson Education, Inc. 4) Luther Industries is currently trading for $27 per share. The stock pays no dividends. A one- year European put option on Luther with a strike price of $30 is currently trading for $2.60. […]
Chapter 21 Model d Can Use The Blacks choles Formula Compute
Copyright © 2014 Pearson Education, Inc. 1 Answer: A Diff: 2 Section: 21.1 The Binomial Option Pricing Model Skill: Conceptual Corporate Finance, 3e (Berk/DeMarzo) Chapter 21 Option Valuation 21.1 The Binomial Option Pricing Model 1) Which of the following statements […]
Chapter 22 Assuming That This Project Will Provide Rearden
Copyright © 2014 Pearson Education, Inc. 13) Assume that you are not able to sell the plant, but you are able to shut down the plant at no cost at any time. Draw a decision tree detailing this problem. Answer: […]
Chapter 22 Recall That Absent Dividends Not Optimal Exercise
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 22 Real Options 22.1 Real Versus Financial Options 1) Which of the following statements is FALSE? A) In particular, because real options allow a decision maker to choose the […]
Chapter 23 The Market Value Wyatt after The IPO And
Copyright © 2014 Pearson Education, Inc. 14) The proceeds from the IPO be if Luther is selling 1.25 million shares is closest to: A) $20.6 million B) $21.6 million C) $21.1 million D) $20.9 million 13 Answer: C Explanation: C) […]
Chapter 23 The Process Selling Stock The Public For
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 23 Raising Equity Capital 23.1 Equity Financing for Private Companies Use the following information to answer the question(s) below. Suppose that Galt Ventures, a venture capital firm, raised $250 […]
Chapter 24 What kind of corporate debt can be secured by any
Answer: C Diff: 1 Section: 24.1 Corporate Debt Skill: Definition Answer: C Diff: 1 Section: 24.1 Corporate Debt Skill: Definition Copyright © 2014 Pearson Education, Inc. 1 Answer: C Diff: 1 Section: 24.1 Corporate Debt Skill: Definition Corporate Finance, 3e […]
Chapter 25 A lease where ownership of the asset transfers to the lessee
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 25 Leasing 25.1 The Basics of Leasing 1) Which of the following statements is FALSE? A) A lease is a contract between two parties: the lessee and the lessor. […]
Chapter 25 Since Rearden Will Get Very Little Tax
Copyright © 2014 Pearson Education, Inc. 3) Assuming that Rearden’s annual lease payments are $1.2 million, then the amount of the savings in year 0 from leasing is closest to: A) $3.8 million B) $3.9 million C) $4.0 million D) […]
Chapter 26 which increases the amount of time between the cash
1 Answer: A Explanation: A) NWC = CA – CL = 8,800 – 6,500 = 2,300 or $2.3 million Diff: 1 Section: 26.1 Overview of Working Capital Skill: Analytical Corporate Finance, 3e (Berk/DeMarzo) Chapter 26 Working Capital Management 26.1 Overview […]
Chapter 27 Which alternative should Taggart choose
Copyright © 2014 Pearson Education, Inc. 4) Which alternative should Taggart choose? A) Alternative #1 since it has the lowest EAR B) Alternative #2 since it has the lowest EAR C) Alternative #3 since it has the lowest EAR D) […]
Chapter 27 With Conservative Financing Policy The Firm Would
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 27 Short-Term Financial Planning 27.1 Forecasting Short-Term Financing Needs 1) Occasionally, a company will encounter circumstances in which cash flows are temporarily negative for an unexpected reason. We refer […]
Chapter 28 Reasons Acquire skill Conceptual7 Which The Following Statements
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 28 Mergers and Acquisitions 28.1 Background and Historical Trends 1) This period is known as the conglomerate wave because firms typically acquired firms in unrelated businesses: A) 1960s B) […]
Chapter 28 There are no expected synergies from the transaction
Copyright © 2014 Pearson Education, Inc. 28.4 The Takeover Process Use the following information to answer the question(s) below. Rearden Metal has earnings per share of $2. It has 10 million shares outstanding and is trading at $20 per share. […]
Chapter 29 ownership and control without unduly burdening managers
Answer: C Diff: 1 Section: 29.1 Corporate Governance and Agency Costs Skill: Analytical Copyright © 2014 Pearson Education, Inc. 1 Answer: B Explanation: B) Any discussion of corporate governance—the system of controls, regulations, and incentives designed to prevent fraud—is a […]
Chapter 3 By evaluating cost and benefits using competitive market prices
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 3 Financial Decision Making and the Law of One Price 3.1 Valuing Decisions 1) Due to a pre-existing contract, Recycle America Inc. has the opportunity to acquire 10,000 pounds […]
Chapter 3 Which of the following statements regarding the Law
Copyright © 2014 Pearson Education, Inc. 2) Which of the following statements regarding the Law of One Price is INCORRECT? A) At any point in time, the price of two equivalent goods trading in different competitive markets will be the […]
Chapter 30 Insurance Use the following information to answer the question
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 30 Risk Management 30.1 Insurance Use the following information to answer the question(s) below. Rearden Metal imports ore from South America. Rearden Metal is worried that the South American […]
Chapter 30 please include a copy of the cumulative standard normal tables
Copyright © 2014 Pearson Education, Inc. 30.3 Exchange Rate Risk For the following problems, please include a copy of the cumulative standard normal tables. 1) Suppose the current exchange rate is $1.62/£, the interest rate in the united states is […]
Chapter 31 Us Tax Policy Allows Companies Apply The
Copyright © 2014 Pearson Education, Inc. 1 Answer: D Explanation: D) PV = = $484,406.85 Here we invest the PV in the U.S. for six months while entering into a forward contract that allows us to convert $ into Pesos […]
Chapter 4 Most Investment Opportunities Have Multiple Cash Flows
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 4 The Time Value of Money 4.1 The Timeline Use the figure for the question(s) below. 1) Which of the following statements regarding timelines is FALSE? A) Timelines are […]
Chapter 4 The British government has a consol bond outstanding
Copyright © 2014 Pearson Education, Inc. 9) The British government has a consol bond outstanding that pays ₤100 in interest each year. Assuming that the current interest rate in Great Britain is 5% and that you will receive your first […]
Chapter 5 C explanation First Need The Monthly Interest Rate
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 5 Interest Rates 5.1 Interest Rate Quotes and Adjustments 1) Which of the following statements is FALSE? A) Because interest rates may be quoted for different time intervals, it […]
Chapter 5 The Real Rate However Can Be negative Anytime
Copyright © 2014 Pearson Education, Inc. 5.2 Application: Discount Rates and Loans 1) Hugh Akston took out a 30-year mortgage with an EAR of 5.9%. If Hugh borrowed $300,000 to buy his home, then his monthly payment will be closest […]
Chapter 6 Bond Cash Flows Prices And Yields skill Conceptual use
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 6 Valuing Bonds 6.1 Bond Cash Flows, Prices, and Yields 1) Which of the following statements is FALSE? A) Bonds are a securities sold by governments and corporations to […]
Chapter 6 then as time goes on the bond price will approach the
Copyright © 2014 Pearson Education, Inc. 22) The amount that the price of bond “D” will change if its yield to maturity increases from 8% to 9% is closest to: A) -$36 B) -$39 C) $36 D) $9 Answer: A […]
Chapter 6 Wyatt oil is contemplating issuing a 20-year bond
Copyright © 2014 Pearson Education, Inc. 4) Which of the following statements is FALSE? A) The bond’s expected return, which is equal to the firm’s debt cost of capital, is less than the yield to maturity if there is a […]
Chapter 7 Palin could have been paid to give speeches sand
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 7 Investment Decision Rules 7.1 NPV and Stand-Alone Projects 1) Which of the following statements is FALSE? A) About 75% of firms surveyed used the NPV rule for making […]
Chapter 7 The internal rate of return rule can result
Copyright © 2014 Pearson Education, Inc. 22) The internal rate of return rule can result in the wrong decision if the projects being compared have: A) differences in scale. B) differences in timing. C) differences in NPV. D) A and […]
Chapter 7 What is the most appropriate tool to use if you are
Copyright © 2014 Pearson Education, Inc. 17) Assuming that the discount rate for project A is 16% and the discount rate for B is 15%, then given that these are mutually exclusive projects, which project would you take and why? […]
Chapter 8 The incremental cash flow that the Krusty Krab
Copyright © 2014 Pearson Education, Inc. 8) The incremental cash flow that the Krusty Krab will incur in year 1 if they elect to upgrade to the new grill is closest to: A) 6,500 B) 7,800 C) 10,800 D) 11,500 […]
Chapter 8 The incremental unlevered net income Shepard Industries
Copyright © 2014 Pearson Education, Inc. 22) The incremental unlevered net income Shepard Industries in year two is closest to: A) $355 B) $415 C) $600 D) $510 Answer: B Explanation: B) Revenues 1200 1400 – Expenses 450 525 – […]
Chapter 8 The opportunity Cost Using Resource The Value Could
Copyright © 2014 Pearson Education, Inc. Corporate Finance, 3e (Berk/DeMarzo) Chapter 8 Fundamentals of Capital Budgeting 8.1 Forecasting Earnings 1) Which of the following statements is FALSE? A) A capital budget lists the projects and investments that a company plans […]