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Chapter 1 Which of the following would not interest a firm seeking longer
Chapter 1—The Scope of Corporate Finance MULTIPLE CHOICE 1. __________ activities allow corporations to raise capital by selling stock to investors. a. NYSE b. Secondary market c. Primary market d. Money market e. Centralized Nasdaq 2. Jane purchased Ford shares […]
Chapter 10 Only Stocks Systematically Overreact Underreact Would Conclude
Chapter 10—Market Efficiency and Behavioral Finance MULTIPLE CHOICE 1. Homer recently opened an Internet trading account believing he can capitalize on numerous stock mispricings now that transactions costs are very low. Since so many novice day traders are involved in […]
Chapter 11 The primary instruments used for long-term financing
Chapter 11—An Overview of Long-Term Financing MULTIPLE CHOICE 1. The primary instruments used for long-term financing include all of the following except: a. commercial paper b. common stock c. preferred stock d. long term debt e. all of the above […]
Chapter 12 Given an increase in personal tax rates on both dividends
Chapter 12—Capital Structure: Theory and Taxes MULTIPLE CHOICE 1. PureMeds is a highly profitable pharmaceutical company that places great importance on funding research and development projects. According to finance research, the expected capital structure for PureMeds: a. would show a […]
Chapter 13 The pecking order model provides a rationale for the development
Chapter 13—Capital Structure: Balancing the Benefits and Costs of Debt MULTIPLE CHOICE 1. Firms with sufficient __________ will not have to issue equity securities to finance investment projects and are thus able to finesse information problems between managers and investors. […]
Chapter 14 Assume the assumptions underlying the APV are relevant
Chapter 14—The Link Between Capital Structure and Capital Budgeting MULTIPLE CHOICE 1. Chapter 14 describes three cash flow discounting methods with the acronyms a. WACC, APV, and SLG b. WACC, FTE, and SLG c. APV, SLG, and TDI d. WACC, […]
Chapter 15 In trouble Co. announced that it would cut its quarterly dividend
Chapter 15—Payout Policy MULTIPLE CHOICE 1. Introuble Co. announced that it would cut its quarterly dividend from $0.15 per share to $0.05 per share. This news resulted in an immediate share price reduction of 4%. When the ex-dividend date arrived, […]
Chapter 16 The group of investment banking firms that purchase
Chapter 16—Investment Banking and the Public Sale of Equity Securities MULTIPLE CHOICE 1. The group of investment banking firms that purchase new securities directly from an issuing firm to resell to investors is known as the: a. Bulge bracket firms […]
Chapter 17 Debt covenants: a. restrict the firm from privately placing debt
Chapter 17—Long-Term Debt and Leasing MULTIPLE CHOICE 1. A syndicated loan is: a. A loan obtained through illegal channels b. A large-denomination loan arranged by a group of commercial banks for a single borrower c. A loan sold to a […]
Chapter 18 An option is called a derivative security because
Chapter 18—Options Basics MULTIPLE CHOICE 1. An option is called a derivative security because: a. its value is derived from that of another asset b. to calculate its worth requires extensive derivations c. it is the basic building block security […]
Chapter 19 Even When The Net Worth The Company
Chapter 19—Black and Scholes and Beyond MULTIPLE CHOICE 1. You are considering the purchase of a call option on Priceless Packing Inc. Priceless has a current stock price of $s.00 per share with an annual volatility of sg percent. The […]
Chapter 2 A company’s balance sheet shows the value of assets
Chapter 2—Financial Statement and Cash Flow Analysis MULTIPLE CHOICE 1. A company’s balance sheet shows the value of assets, liabilities, and stockholders’ equity: a. at the end of the fiscal year b. for any given period of time c. at […]
Chapter 20 Which of the following would be considered a player
Chapter 20—International Financial Management MULTIPLE CHOICE 1. Which of the following would be considered a player in the foreign exchange (forex) market? a. exporters and importers b. investors and hedgers c. speculators and dealers d. governments e. all of the […]
Chapter 21 Describe The Risks That The Firm Takes
Chapter 21—Strategic and Operational Financial Planning MULTIPLE CHOICE 1. Last year, Grow Now reported sales of $s million, net income of $ni, total assets of $a million, and total equity of $e million. If the firm wants to increase sales […]
Chapter 22 The Price Per Share Stock The End
Chapter 22—Cash Conversion, Inventory, and Receivables Management MULTIPLE CHOICE 1. Cold Chiller Corporation (CCC) has annual sales of $s million, cost of goods sold of cogs percent, average age of inventory of aai days, average collection period of acp days, […]
Chapter 23 which two are generally the same from the perspectives
Chapter 23—Liquidity Management 1. Of the four components involved in the concept of “float”, which two are generally the same from the perspectives of both the payee and payer? a. processing and clearing b. clearing and mail c. mail and […]
Chapter 24 which produces a variety of gourmet jams
Chapter 24—Mergers, Corporate Control, and Corporate Governance MULTIPLE CHOICE 1. The __________ exaggerates the differences between focused and diversified firms. a. mixed offering b. LBO c. Herfindahl Index (HI) d. ESOP e. MBO 2. The main sources of __________ are […]
Chapter 25 A firm has reached a voluntary settlement with its creditors
Chapter 25—Bankruptcy and Financial Distress MULTIPLE CHOICE 1. Bankruptcy occurs when: a. a firm experiences economic failure. b. a firm is unable to pay its liabilities as they come due and is facing a liquidity crisis. c. a firm’s liabilities […]
Chapter 26 the dominant source of venture capital funding today is from
Chapter 26—Entrepreneurial Finance and Venture Capital MULTIPLE CHOICE 1. In the United States, the dominant source of venture capital funding today is from: a. Institutional investors b. Private U.S. individuals c. Private foreign individuals d. Bond issues e. Preferred stock […]
Chapter 27 Ryan believes the exchange rate between U.S. dollars
Chapter 27—Risk Management and Financial Engineering MULTIPLE CHOICE 1. Ryan believes the exchange rate between U.S. dollars and Swiss Francs will be $r1/SF three months from now. The current spot rate is $r2/SF, and the three-month forward rate is $r3/SF. […]
Chapter 3 The difference in present values increases at a decreasing rate
Chapter 3—Time Value of Money MULTIPLE CHOICE 1. Financial markets allow savers and borrowers to meet differing consumption preferences if: a. a limited number of financial intermediaries exist b. riskier borrowers are able to access funds at the equilibrium riskless […]
Chapter 3 what amount of growth is feasible each year
4. You need to accumulate $fv at the end of t years to fund your child’s education. Your investment rate of return is i percent. If you have $pv in your savings account, how much additional money will you need […]
Chapter 4 You observe that a one-year riskless investment offers
Chapter 4—Valuation MULTIPLE CHOICE 1. The value of any asset equals: a. the cost of maintaining an asset over its useful life b. the present value of all of its future benefits c. the book value of the asset d. […]
Chapter 5 Match Each The Following Terms Its Most
Chapter 5—The Trade-off between Risk and Return MULTIPLE CHOICE 1. Assuming that investors are risk averse, a negative average real return on government bills over a ten year period would suggest: a. investors were able to increase purchasing power by […]
Chapter 6 while the efficient set consists of only those portfolios offering
Chapter 6—Risk, Return and the Capital Asset Pricing Model MULTIPLE CHOICE 1. The “feasible set” and “efficient set” differ because: a. the feasible set considers all portfolios of risky stocks, whereas the efficient set includes only stock portfolios with minimum […]
Chapter 7 Evaluate The Following Projects Using The Net
6. How can a firm avoid falling into the timing traps when prioritizing projects? ANS: Using NPV will lead to the correct decision when evaluating projects with very different cash flow patterns over time. The firm can use the IRR […]
Chapter 7 When using IRR, NPV, or PI in capital budgeting
Chapter 7—Capital Budgeting Process and Techniques MULTIPLE CHOICE 1. When using IRR, NPV, or PI in capital budgeting: a. mutually exclusive projects are always ranked the same b. direct estimates of the increase or decrease in shareholder value can be […]
Chapter 8 For the recently completed fiscal year, Royal Tees Inc
Chapter 8—Cash Flow and Capital Budgeting MULTIPLE CHOICE 1. For the recently completed fiscal year, Royal Tees Inc. produced net income of $ni, had a depreciation expense of $d, total cost of goods sold were $cogs, and taxes paid of […]
Chapter 8 The Firm Going Purchase An additional Add INV Inventory
7. You are considering investing in a project related to a new product opportunity. If you undertake the project immediately, you calculate the NPV will be $NPVi. If you defer the decision for one year, you will learn more about […]
Chapter 9 Operating and financial leverage may exist for firms
Chapter 9—Cost of Capital and Project Risk MULTIPLE CHOICE 1. Operating and financial leverage may exist for firms. Which of the following statements is accurate concerning leverage? a. The presence of common equity creates financial leverage. b. The presence of […]