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Chapter 1 1 An investment is said to be liquid if the investment
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) Because a corporation is a separate legal entity, when it fails to repay […]
Chapter 10 1 Big Cure and Little Cure are both pharmaceutical companies
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the table for the question(s) below. Consider the following realized annual returns: Year End S&P 500 Realized Return IBM Realized Return 1996 […]
Chapter 10 2 The Standard Deviation For The Return Portfolio
Use the table for the question(s) below. Consider the following realized annual returns: Year End S&P 500 Realized Return IBM Realized Return 1996 23.6% 46.3% 1997 24.7% 26.7% 1998 30.5% 86.9% 1999 9.0% 23.1% 2000 –2.0% 0.2% 2001 –17.3% –3.2% […]
Chapter 10 3 Assume that you purchased Ford Motor Company stock
Use the table for the question(s) below. Consider the following Price and Dividend data for Ford Motor Company: Date Price ($) Dividend ($) December 31, 2004 $14.64 January 26, 2005 $13.35 $0.10 April 28, 2005 $9.14 $0.10 July 29, 2005 […]
Chapter 11 1 Aggressive Investors Will Invest More The Tangent
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) The variance of a portfolio is equal to the weighted average covariances of […]
Chapter 11 2 The Covariance Between Lowes And IBMS Returns
Use the table for the question(s) below. Consider the following returns: Year End Lowes Realized Return Home Depot Realized Return IBM Realized Return 2000 20.1% –14.6% 0.2% 2001 72.7% 4.3% –3.2% 2002 –25.7% –58.1% –27.0% 2003 56.9% 71.1% 27.9% 2004 […]
Chapter 11 3 Essay Write Your Answer The Space Provided
ESSAY. Write your answer in the space provided or on a separate sheet of paper. Use the table for the question(s) below. Consider the following covariances between securities: Duke Microsoft Wal–Mart Duke 0.0568 –0.0193 0.0037 Microsoft –0.0193 0.2420 0.1277 Wal–Mart […]
Chapter 12 1 Assume The Cap Assumptions Hold Suppose That
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the information for the question(s) below. Suppose that the risk–free rate is 5% and the market portfolio has an expected return of […]
Chapter 12 2 The Statistical Technique That Identifies The Bets
Use the table for the question(s) below. Consider the following stock price and shares outstanding data: Stock Name Price per Share Shares Outstanding (Billions) Lowes $28.80 1.53 Wal–Mart $47.90 4.17 Intel $19.60 5.77 Boeing $75.00 0.79 40) The total market […]
Chapter 13 1 Researchers Have Found Evidence That The Presence
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the table for the question(s) below. Consider the following information regarding the Fama French Carhart four factor model: Factor Portfolio Average Monthly […]
Chapter 13 2 Although The True Market Portfolio All Invested
Use the table for the question(s) below. Consider the following information regarding the Fama French Carhart four factor model: Factor Portfolio Average Monthly Return (%) IBM Factor Betas GE Factor Betas Wal–Mart Factor Betas Rm–rf0.64 0.712 0.937 0.782 SMB 0.17 […]
Chapter 14 1 Exam Name Multiple Choice Choose The One
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the information for the question(s) below. You are evaluating a new project and need an estimate for your project’s beta. You have […]
Chapter 14 2 Consider The Following Equation61ed A the This Equation
Use the information for the question(s) below. Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome being equally likely. The initial investment required for […]
Chapter 14 3 Use The Information For The Questions Below
Use the information for the question(s) below. You are evaluating a new project and need an estimate for your project’s beta. You have identified the following information about three firms with comparable projects: Firm Name Equity Beta Debt Beta Debt […]
Chapter 15 1 The total amount available to payout to all the investors
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) Because the cash flows of the levered firm are equal to the sum […]
Chapter 15 2 Flagstaff Enterprises expected to have free cash flow in
41) Which of the following statements is false? 41) A) In general, as a firm’s interest expense approaches its expected taxable earnings, the marginal tax advantage of debt increases, limiting the amount of equity the firm should use. B) No […]
Chapter 16 1 Luther Industries has no debt and expects to generate free
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) Firms have an incentive to increase leverage to exploit the tax benefits of […]
Chapter 16 2 Gaming Incorporated EGI Firm With Debt And
Use the information for the question(s) below. Monsters Incorporated (MI) in ready to launch a new product. Depending upon the success of this product, MI will have a value of either $100 million, $150 million, or $191 million, with each […]
Chapter 17 1 Non Cash Special Dividends Are Commonly Used
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the information for the question(s) below. Omicron Technologies has $50 million in excess cash and no debt. The firm expects to generate […]
Chapter 17 2 Rockwood Industries has 100 million shares outstanding
49) Which of the following statements is false? 49) A) From an accounting perspective, dividends generally reduce the firm’s current (or accumulated) retained earnings. B) The way a firm chooses between paying dividends and retaining earnings is referred to as […]
Chapter 18 1 Which The Following Statements False a Projects With
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the information for the question(s) below. Omicron Industries’ Market Value Balance Sheet ($ Millions) and Cost of Capital Assets Liabilities Cost of […]
Chapter 18 2 The Interest Tax Shield Provided Omicrons New
Use the information for the question(s) below. Aardvark Industries is considering a project that will generate the following free cash flows: Year 0 1 2 3 Free Cash Flows ($200) $100 $80 $60 You are also provided with the following […]
Chapter 18 3 Calculate The The Levered Value Aardvarks New
63) Consider the following equation: rwacc =E E + D rE+D E + D rD(1 –c) the term rD(1 –c) in this equation is? 63) A) the required rate of return on debt B) the required rate of return on […]
Chapter 19 1 Based upon Ideko’s Sales and Operating Cost Assumptions
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the tables for the question(s) below. Pro Forma Income Statement for Ideko, 2005–2010 Year 2005 2006 2007 2008 2009 2010 Income Statement […]
Chapter 19 2 What range for the market value of equity for Ideko
Use the tables for the question(s) below. Estimated 2005 Income Statement and Balance Sheet Data for Ideko Corporation Year 2005 Year 2005 Income Statement ($ 000) Balance Sheet ($ 000) 1 Sales 75,000 Assets 2 Cost of Goods Sold 1 […]
Chapter 2 1 The third party who checks annual financial statements to ensure
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements regarding the income statement is incorrect? 1) A) The last or “bottom” line of the income statement […]
Chapter 2 2 Which of the following is not an operating expense
25) Which of the following adjustments to net income is not correct if you are trying to calculate cash flow from operating activities? 25) A) Add increases in accounts payable B) Add increases in accounts receivable C) Deduct increases in […]
Chapter 20 1 Luther Industries that expires in three months with a strike
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) You can think of the debt holders as owning the firm and having […]
Chapter 21 1 Ba Could Positive Negative Depending Whether The
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) The Black–Scholes formula can be used to price American or European call options […]
Chapter 22 1 Kinston Industries Will Invest Million Year One
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is not a real option? 1) A) An expansion option B) An abandonment option C) An investment timing […]
Chapter 22 2 Kinston Has The Option Stop The Project
25) 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. The value of the option to abandon production will be closest to: 25) A) […]
Chapter 23 1 IPO Including The Number Shares Offered And
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) At an IPO, a firm offers a large block of shares for sale […]
Chapter 23 2 You founded your own firm three years ago
Use the information for the question(s) below. You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 2 million shares of stock. Since then, you have sold an additional […]
Chapter 24 1 Treasury Note Treasury Bond Offering The Stop out
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) In the event of default, the assets not pledged as collateral for outstanding […]
Chapter 25 1 Because Capital Leases Increase The Apparent Leverage
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) Leasing allows the party best able to bear the risk to hold it. […]
Chapter 26 1 Your firm purchases goods from its supplier on terms
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Your firm purchases goods from its supplier on terms of 2/10, net 40. The effective annual cost to your firm if it […]
Chapter 27 1 The Prime Rate The Rate Banks Charge
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) When following a conservative financing policy, a firm would use long–term sources of […]
Chapter 28 1 Cost reduction Synergies Are Hard Predict And Achieve b
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements regarding mergers and taxes is false? 1) A) Like a large portfolio, large firms bear less idiosyncratic […]
Chapter 29 1 C explanation Recent Events Notwithstanding Investor Protection The
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) The conflict of interest between managers and investors derives from the separation of […]
Chapter 3 1 An independent film maker is considering producing a new movie
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the information for the question(s) below. An independent film maker is considering producing a new movie. The initial cost for making this […]
Chapter 3 2 Suppose a risky security pays an average cash flow
Use the table for the question(s) below. Security Bid Ask IBM 79.45 79.50 MRK 39.95 40.05 C48.50 48.55 38) Consider an ETF that is made up of one share each of IBM, MRK, and C. The minimum bid price for […]
Chapter 30 1 When Firm Buys Insurance Transfers The Risk
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) To insure their assets against hazards such as fire, storm damage, vandalism, earthquakes, and other natural and environmental risks firms commonly purchase […]
Chapter 31 1 Ireland The Current Exchange Rate 127 And
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Consider the following equation: r* ¥=1 +r¥ 1 +r$(1 +r* $) – 1 the term r¥ in this equation refers to 1) […]
Chapter 4 1 The Amount You will Have Years Closest Which
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 10%, then the present […]
Chapter 4 2 62 A Perpetuity Stream Equal Cash Flows
42) Consider the following timeline: If the current market rate of interest is 10%, then the future value of this timeline is closest to: 42) A) $605 B) $666 C) $500 D) $650 Use the table for the question(s) below. […]
Chapter 5 1 Which alternative offers you the lowest effective rate of return
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the table for the question(s) below. Consider the following investment alternatives: Investment Rate Compounding A6.25% Annual B6.10% Daily C6.125 Quarterly D6.120 Monthly […]
Chapter 5 2 Your firm needs to invest in a new delivery truck
Use the table for the question(s) below. Suppose the term structure of interest rates is shown below: Term 1 year 2 years 3 years 5 years 10 years 20 years Rate (EAR%) 5.00% 4.80% 4.60% 4.50% 4.25% 4.15% 33) Consider […]
Chapter 6 1 Assuming That Your Capital Constrained Which Project
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) When the risks of two projects are different, only the NPV rule will […]
Chapter 6 2 Assume that projects Alpha and Beta are mutually exclusive
Use the table for the question(s) below. Consider the following two projects: Project Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash Flow Discount Rate A–100 40 50 60 N/A […]
Chapter 6 3 Your firm is preparing to open a new retail strip mall
ESSAY. Write your answer in the space provided or on a separate sheet of paper. Use the table for the question(s) below. Consider two mutually exclusive projects with the following cash flows: Project C/F0C/F1C/F2C/F3C/F4C/F5C/F6 A$(41,215) $12,500 $14,000 $16,500 $18,000 20,000 […]
Chapter 7 1 Scan Incorporated GSI Currently Sells Its Latest
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) Managers sometimes continue to invest in a project that has a negative NPV […]
Chapter 7 2 When Computing The Incremental Earnings Investment Decision
41) Which of the following statements is false? 41) A) The firm deducts a fraction of the investments in plant, property, and equipment each year as depreciation. B) Sunk cost fallacy is a term used to describe the tendency of […]
Chapter 7 3 Industries Considering Investing Machine That Will Cost
65) Epiphany is worried about the reliability of the sales forecast. How sensitive is the project‘s NPV to a 10% change in sales. Answer: Base Case Year 0 1 2 3 Sales (Revenues) 100,000 100,000 100,000 – Cost of Goods […]
Chapter 8 1 The Sisyphean Company has a bond outstanding
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is false? 1) A) The yield to maturity is typically stated as an annual rate by multiplying […]
Chapter 8 2 The credit spread of the BBB corporate bond is closest
41) Which of the following equations is incorrect? 41) A) Expected future spot interest rate = forward interest rate + risk premium B) fn= (1 +YTMn – 1)n – 1 (1 +YTMn)n– 1 C) (1 +YTMn)n= (1 +YTMn – 1)n […]
Chapter 9 1 Only The Relatively Rare Case Which Have
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Use the information for the question(s) below. Von Bora Corporation is expected pay a dividend of $1.40 per share at the end of […]
Chapter 9 2 The Equity Cost Capital For Stock The
Use the information for the question(s) below. Von Bora Corporation is expected pay a dividend of $1.40 per share at the end of this year and a $1.50 per share at the end of the second year. You expect Von […]