Fundamentals of Financial Management 14th Edition

WEB APPENDIX 14ADEGREE OF LEVERAGE Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. A company currently sells 75,000 units annually. At this sales level, its EBIT is $4 million, and its

WEB APPENDIX 07AZERO COUPON BONDS Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Which of the following statements is CORRECT? a. If interest rates increase, a 10-year zero coupon bond's

WEB APPENDIX 12CUSING THE CAPM TO ESTIMATE THE RISK-ADJUSTED COST OF CAPITAL Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Sunshine Inc. has two equally-sized divisions. Division A has a beta

WEB APPENDIX 08ACALCULATING BETA COEFFICIENTS Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Which of the following statements is CORRECT? a. The CAPM is an ex ante model, which means

WEB APPENDIX 07CBANKRUPTCY AND REORGANIZATION Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Chapter 7 of the Bankruptcy Act is designed to do all of the following EXCEPT: a. Provides

WEB APPENDIX 05ACONTINUOUS COMPOUNDING AND DISCOUNTING Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. If you receive $15,000 today and can invest it at a 5% annual rate compounded continuously, what

WEB APPENDIX 12DTECHNIQUES FOR MEASURING BETA RISK Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Which of the following methods involves calculating an average beta for comparable firms and using that

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CHAPTER 01AN OVERVIEW OF FINANCIAL MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Note that there is an overlap between the T/F and multiple-choice questions, as some of the T/F statements

CHAPTER 01AN OVERVIEW OF FINANCIAL MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 15 Cengage Learning Testing, Powered by Cognero Page 15 Cengage Learning Testing, Powered by Cognero Page 15 LEARNING OBJECTIVES: FOFM.BRIG.16.01.01 - What Is Finance? NATIONAL STANDARDS: United States - BUSPROG.FOFM.BRIG.16.06 - Reflective thinking STATE STANDARDS:

CHAPTER 10THE COST OF CAPITAL Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 STATE STANDARDS: United States - OH - DISC.FOFM.BRIG.16.03 - Capital budgeting and cost of capital TOPICS: WACC and cap.

Chapter 10: The Cost of Capital Learning Objectives 247 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

258 Comprehensive/Spreadsheet Problem Chapter 10: The Cost of Capital 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

CHAPTER 10THE COST OF CAPITAL Cengage Learning Testing, Powered by Cognero Page 35 ANSWER: b RATIONALE: D1 $1.75 P0 $42.50 g 7.00% F 5.00% re = D1/(P0 (1 F)) + g 11.33% POINTS: 1 DIFFICULTY: MODERATE REFERENCES: 10-6 Cost of New Common Stock, re LEARNING OBJECTIVES: FOFM.BRIG.16.10.06 - Cost

CHAPTER 10THE COST OF CAPITAL Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. "Capital" is sometimes defined as funds supplied to a firm by investors. a. True b. False

288 Comprehensive/Spreadsheet Problem Chapter 11: The Basics of Capital Budgeting 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

Chapter 11: The Basics of Capital Budgeting Learning Objectives 269 Calculate and use the major capital budgeting decision criteria, which are NPV, IRR, MIRR, and payback. Explain why NPV is the best criterion and how it overcomes problems inherent in the other methods. Chapter 11: The Basics of Capital Budgeting

CHAPTER 11THE BASICS OF CAPITAL BUDGETING Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Which of the following statements is CORRECT? a. More of Project A's cash flows occur

CHAPTER 11THE BASICS OF CAPITAL BUDGETING Cengage Learning Testing, Powered by Cognero Page 40 Cengage Learning Testing, Powered by Cognero Page 40 Cengage Learning Testing, Powered by Cognero Page 40 e. 2.85 years ANSWER: c RATIONALE: Year 0 1 2 3 Cash flows $750 $300 $325 $350

CHAPTER 11THE BASICS OF CAPITAL BUDGETING Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. A firm should never accept a project if its acceptance would lead to an increase in the

CHAPTER 12CASH FLOW ESTIMATION AND RISK ANALYSIS Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 LEARNING OBJECTIVES: FOFM.BRIG.16.12.01 - Conceptual Issues in Cash Flow Estimation NATIONAL STANDARDS: United States - BUSPROG.FOFM.BRIG.16.03 -

Chapter 12: Cash Flow Estimation and Risk Analysis Comprehensive/Spreadsheet Problem 327 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected

340 Integrated Case Chapter 12: Cash Flow Estimation and Risk Analysis 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected

Chapter 12: Cash Flow Estimation and Risk Analysis Learning Objectives 307 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected

CHAPTER 12CASH FLOW ESTIMATION AND RISK ANALYSIS RATIONALE: Deprec. Annual Year-end Year Rate Basis Deprec. Book Value 1 0.20 $50,000 $10,000 $40,000 2 0.32 50,000 16,000 24,000 3 0.19 50,000 9,500 14,500 4 0.12 50,000 6,000 8,500 5 0.11 50,000 5,500 3,000 6 0.06 50,000 3,000 0 1.00 $50,000

CHAPTER 12CASH FLOW ESTIMATION AND RISK ANALYSIS Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Because of improvements in forecasting techniques, estimating the cash flows associated with a project has become

CHAPTER 13REAL OPTIONS AND OTHER TOPICS IN CAPITAL BUDGETING RATIONALE: (Dollars in thousands) WACC = 10.00% 0 1 2 3 4 5 Original project: $3,000 $500 $500 $500 $500 $ 500 OP's action: Prob. Buys 35% 6,000 Doesn't buy 65% $ 0 Expected future cash flow $2,100 Total expected

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CHAPTER 13REAL OPTIONS AND OTHER TOPICS IN CAPITAL BUDGETING Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Real options are valuable, and that value is correctly captured by a traditional NPV

CHAPTER 14CAPITAL STRUCTURE AND LEVERAGE Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. A firm's business risk is largely determined by the financial characteristics of its industry, especially by the amount

Chapter 14: Capital Structure and Leverage Learning Objectives 371 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

Contents iii 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All

Chapter 14: Capital Structure and Leverage Integrated Case 389 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

xiv Preface 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All

CHAPTER 14CAPITAL STRUCTURE AND LEVERAGE Cengage Learning Testing, Powered by Cognero Page 34 Cengage Learning Testing, Powered by Cognero Page 34 Cengage Learning Testing, Powered by Cognero Page 34 ANSWER: a RATIONALE: wd 55% Interest rate = rd 7.0% wc 45% New cost of equity = rs 11.0%

CHAPTER 14CAPITAL STRUCTURE AND LEVERAGE Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 KEYWORDS: Bloom's: Comprehension OTHER: Multiple Choice: Conceptual KEYWORDS: Bloom's: Comprehension OTHER: Multiple Choice: Conceptual KEYWORDS: Bloom's: Comprehension OTHER: Multiple

420 Integrated Case Chapter 15: Distributions to Shareholders 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom

Chapter 15: Distributions to Shareholders Learning Objectives 407 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom

CHAPTER 15DISTRIBUTIONS TO SHAREHOLDERS: DIVIDENDS AND SHARE REPURCHASES Cengage Learning Testing, Powered by Cognero Page 20 Cengage Learning Testing, Powered by Cognero Page 20 Cengage Learning Testing, Powered by Cognero Page 20 KEYWORDS: Bloom's: Comprehension OTHER: Multiple Choice: Conceptual KEYWORDS: Bloom's: Comprehension OTHER: Multiple Choice: Conceptual KEYWORDS: Bloom's:

CHAPTER 15DISTRIBUTIONS TO SHAREHOLDERS: DIVIDENDS AND SHARE REPURCHASES Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. The optimal distribution policy strikes that balance between current dividends and capital gains that maximizes

CHAPTER 16WORKING CAPITAL MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 TOPICS: Current asset financing KEYWORDS: Bloom's: Comprehension OTHER: Multiple Choice: Conceptual TOPICS: Current asset financing KEYWORDS: Bloom's: Comprehension OTHER: Multiple

Chapter 16: Working Capital Management Integrated Case 447 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom

Chapter 16: Working Capital Management Learning Objectives 433 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom

CHAPTER 16WORKING CAPITAL MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Net operating working capital, defined as current assets minus the difference between current liabilities and notes payable, is equal

CHAPTER 16WORKING CAPITAL MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 41 Cengage Learning Testing, Powered by Cognero Page 41 Cengage Learning Testing, Powered by Cognero Page 41 Accounts receivable = $1,800 Accounts payable = $2,500 a. 28 days b. 32 days c.

Chapter 17: Financial Planning and Forecasting Learning Objectives 461 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

Chapter 17: Financial Planning and Forecasting Comprehensive/Spreadsheet Problem 473 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

CHAPTER 17FINANCIAL PLANNING AND FORECASTING Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. The first, and most critical, step in constructing a set of forecasted financial statements is the sales forecast.

Chapter 18: Derivatives and Risk Management Learning Objectives 485 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

498 Integrated Case Chapter 18: Derivatives and Risk Management 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom

CHAPTER 18DERIVATIVES AND RISK MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. One objective of risk management can be to reduce the volatility of a firm's cash flows. a.

CHAPTER 18DERIVATIVES AND RISK MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 13 Cengage Learning Testing, Powered by Cognero Page 13 Cengage Learning Testing, Powered by Cognero Page 13 KEYWORDS: Blooms: Comprehension OTHER: Multiple Choice: Conceptual DATE CREATED: 4/17/2014 5:07 PM DATE MODIFIED: 11/12/2014 4:32 PM QUESTION ID:

Chapter 19: Multinational Financial Management Learning Objectives 511 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom

Chapter 19: Multinational Financial Management Integrated Case 525 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom

CHAPTER 19MULTINATIONAL FINANCIAL MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 14 Cengage Learning Testing, Powered by Cognero Page 14 Cengage Learning Testing, Powered by Cognero Page 14 c. 2.0701 d. 2.1218 e. 2.1749 ANSWER: b RATIONALE: = $1.98 $ = 1.02 SF SF/ =

CHAPTER 19MULTINATIONAL FINANCIAL MANAGEMENT Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. Multinational financial management requires that financial analysts consider the effects of changing currency values. a. True b.

CHAPTER 02FINANCIAL MARKETS AND INSTITUTIONS Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Note that there is an overlap between the T/F and multiple-choice questions, as some of the T/F statements are

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

CHAPTER 20HYBRID FINANCING: PREFERRED STOCK, LEASING, WARRANTS, AND CONVERTIBLES PMT = AT leasing PMT = $1,404 BT leasing PMT = AT PMT/(1 T) = $2,160 POINTS: 1 DIFFICULTY: CHALLENGING REFERENCES: 20-2 Leasing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: FOFM.BRIG.16.20.02 - Leasing NATIONAL STANDARDS: United States -

554 Integrated Case Chapter 20: Hybrid Financing 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Chapter 20: Hybrid Financing Learning Objectives 539 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

CHAPTER 20HYBRID FINANCING: PREFERRED STOCK, LEASING, WARRANTS, AND CONVERTIBLES Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. The "preferred" feature of preferred stock means that it normally will provide a higher

CHAPTER 20HYBRID FINANCING: PREFERRED STOCK, LEASING, WARRANTS, AND CONVERTIBLES RATIONALE: Par value $1,000.00 Conversion ratio 25.00 Conversion price = Par value/Conversion ratio = $40.00 POINTS: 1 DIFFICULTY: EASY REFERENCES: 20-4 Convertibles QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: FOFM.BRIG.16.20.04 - Convertibles NATIONAL STANDARDS: United States - BUSPROG.FOFM.BRIG.16.03

CHAPTER 21MERGERS AND ACQUISITIONS Cengage Learning Testing, Powered by Cognero Page 13 Cengage Learning Testing, Powered by Cognero Page 13 Cengage Learning Testing, Powered by Cognero Page 13 TOPICS: Synergistic gain KEYWORDS: Blooms: Comprehension DATE CREATED: 4/17/2014 5:07 PM DATE MODIFIED: 9/4/2014 3:14 PM QUESTION ID: JFND-GO4R-ER3U-1CBW QUESTION

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

CHAPTER 21MERGERS AND ACQUISITIONS Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. In a merger with true synergies, the post-merger value exceeds the sum of the separate companies' pre-merger values.

CHAPTER 03FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 LEARNING OBJECTIVES: FOFM.BRIG.16.03.04 - Statement of Cash Flows NATIONAL STANDARDS: United States - BUSPROG.FOFM.BRIG.16.06 - Reflective thinking

Chapter 3: Financial Statements, Cash Flow, and TaxesComprehensive/Spreadsheet Problem 35 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

Chapter 3: Financial Statements, Cash Flow, and Taxes Learning Objectives 23 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected

CHAPTER 03FINANCIAL STATEMENTS, CASH FLOW, AND TAXES EBIT $808.00 Tax rate 35% EBIT(1 T) = $525.20 POINTS: 1 DIFFICULTY: MODERATE REFERENCES: 3-7 Free Cash Flow LEARNING OBJECTIVES: FOFM.BRIG.16.03.07 - Free Cash Flow NATIONAL STANDARDS: United States - BUSPROG.FOFM.BRIG.16.03 - Analytic skills STATE STANDARDS: United States - OH - DISC.FOFM.BRIG.16.05

CHAPTER 03FINANCIAL STATEMENTS, CASH FLOW, AND TAXES United States - OH - DISC.FOFM.BRIG.16.06 - Finance function TOPICS: Net income vs. FCF KEYWORDS: Bloom's: Evaluation OTHER: Multiple Choice: Problem United States - OH - DISC.FOFM.BRIG.16.06 - Finance function TOPICS: Net income vs. FCF KEYWORDS: Bloom's: Evaluation OTHER: Multiple Choice:

CHAPTER 03FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 This chapter has a lot of definitions. They are important, but we don't like to make students

CHAPTER 04ANALYSIS OF FINANCIAL STATEMENTS Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 To keep this chapter from involving too much memorization, we provide our students with a formula sheet for use

CHAPTER 04ANALYSIS OF FINANCIAL STATEMENTS Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 c. Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more

Chapter 4: Analysis of Financial Statements Comprehensive/Spreadsheet Problem 63 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

Chapter 4: Analysis of Financial Statements Learning Objectives 47 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

CHAPTER 04ANALYSIS OF FINANCIAL STATEMENTS Cengage Learning Testing, Powered by Cognero Page 54 Cengage Learning Testing, Powered by Cognero Page 54 Cengage Learning Testing, Powered by Cognero Page 54 112. Jordan Inc has the following balance sheet and income statement data: Cash $ 14,000 Accounts

CHAPTER 04ANALYSIS OF FINANCIAL STATEMENTS Cengage Learning Testing, Powered by Cognero Page 41 Cengage Learning Testing, Powered by Cognero Page 41 Cengage Learning Testing, Powered by Cognero Page 41 DIFFICULTY: EASY REFERENCES: 4-5 Profitability Ratios LEARNING OBJECTIVES: FOFM.BRIG.16.04.05 - Profitability Ratios NATIONAL STANDARDS: United States - BUSPROG.FOFM.BRIG.16.03 -

CHAPTER 05TIME VALUE OF MONEY Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Note that there is an overlap between the T/F and multiple-choice questions, as some of the T/F statements are

Chapter 5: Time Value of Money Answers and Solutions 99 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

110 Integrated Case Chapter 5: Time Value of Money 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

Chapter 5: Time Value of Money Learning Objectives 79 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

CHAPTER 05TIME VALUE OF MONEY Cengage Learning Testing, Powered by Cognero Page 61 Cengage Learning Testing, Powered by Cognero Page 61 Cengage Learning Testing, Powered by Cognero Page 61 N = Periods 10 PMT $0 I = I/Period 3.0% PV $1,500 Could be found using a calculator, an

CHAPTER 05TIME VALUE OF MONEY Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 investments is the same and is greater than zero. a. Investment A pays $250 at the end of

CHAPTER 05TIME VALUE OF MONEY Cengage Learning Testing, Powered by Cognero Page 41 Cengage Learning Testing, Powered by Cognero Page 41 Cengage Learning Testing, Powered by Cognero Page 41 d. $21,264 e. $22,327 ANSWER: a RATIONALE: N 5 I/YR 8.5% PV $0.00 PMT $3,100 FV $18,369

Chapter 6: Interest Rates Learning Objectives 121 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Chapter 6: Interest Rates Comprehensive/Spreadsheet Problem 133 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

CHAPTER 06INTEREST RATES Cengage Learning Testing, Powered by Cognero Page 20 Cengage Learning Testing, Powered by Cognero Page 20 Cengage Learning Testing, Powered by Cognero Page 20 52. Inflation is expected to increase steadily over the next 10 years, there is a positive maturity risk premium on both

CHAPTER 06INTEREST RATES Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 The difficulty of these questions as seen by students will depend on (1) what was discussed in class and (2) how

CHAPTER 07BONDS AND THEIR VALUATION Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 c. Bond A's current yield is greater than 8%. d. Bond A has a higher price than

164 Integrated Case Chapter 7: Bonds and Their Valuation 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

Chapter 7: Bonds and Their Valuation Learning Objectives 145 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

CHAPTER 07BONDS AND THEIR VALUATION Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. If a firm raises capital by selling new bonds, it could be called the "issuing firm," and the

CHAPTER 07BONDS AND THEIR VALUATION Cengage Learning Testing, Powered by Cognero Page 33 Cengage Learning Testing, Powered by Cognero Page 33 Cengage Learning Testing, Powered by Cognero Page 33 capital loss than the capital gain stemming from a 1.0 percentage point decrease in the interest rate. ANSWER: e

CHAPTER 08RISK AND RATES OF RETURN Cengage Learning Testing, Powered by Cognero Page 41 Cengage Learning Testing, Powered by Cognero Page 41 Cengage Learning Testing, Powered by Cognero Page 41 KEYWORDS: Bloom's: Comprehension OTHER: Multiple Choice: Conceptual KEYWORDS: Bloom's: Comprehension OTHER: Multiple Choice: Conceptual KEYWORDS: Bloom's: Comprehension OTHER:

Chapter 8: Risk and Rates of Return Learning Objectives 183 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

Chapter 8: Risk and Rates of Return Integrated Case 199 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

CHAPTER 08RISK AND RATES OF RETURN Cengage Learning Testing, Powered by Cognero Page 55 Cengage Learning Testing, Powered by Cognero Page 55 Cengage Learning Testing, Powered by Cognero Page 55 a. 1.06 b. 1.17 c. 1.29 d. 1.42 e. 1.56 ANSWER: b RATIONALE:

CHAPTER 08RISK AND RATES OF RETURN Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. The tighter the probability distribution of its expected future returns, the greater the risk of a given

CHAPTER 08RISK AND RATES OF RETURN Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 ANSWER: c POINTS: 1 DIFFICULTY: MODERATE REFERENCES: 8-3 Risk in a Portfolio Context: The CAPM LEARNING OBJECTIVES: FOFM.BRIG.16.08.03

Chapter 9: Stocks and Their Valuation Learning Objectives 215 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for

Chapter 9: Stocks and Their Valuation Comprehensive/Spreadsheet Problem 231 Chapter 9: Stocks and Their Valuation Comprehensive/Spreadsheet Problem 231 Chapter 9: Stocks and Their Valuation Comprehensive/Spreadsheet Problem 231 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as

CHAPTER 09STOCKS AND THEIR VALUATION Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 Cengage Learning Testing, Powered by Cognero Page 1 1. A proxy is a document giving one party the authority to act for another party, including the power

CHAPTER 09STOCKS AND THEIR VALUATION RATIONALE: FCF1 $10 FCF2 $25 g 4% WACC 14% First, find the horizon, or continuing, value at t = 2: HV2 = FCF2(1 + g)/(WACC g) = $25(1.04)/(0.14 0.04) = $26.0/0.10 = $260.00 Then find the PV of the free cash flows and the

CHAPTER 09STOCKS AND THEIR VALUATION Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 Cengage Learning Testing, Powered by Cognero Page 21 ANSWER: c RATIONALE: D1 $0.75 rs 10.5% g 6.4% P0 = D1/(rs g) $18.29 POINTS: 1 DIFFICULTY: EASY REFERENCES:

Nile Food's stock has a beta of 1.4, while Elba Eateries' stock has a beta of 0.7. Assume that the risk-free rate, rRF, is 5.5% and the market risk premium, (rM - rRF), equals 4%. Which of the following statements is CORRECT? a.If the risk-free rate increases but the market risk

Stock A has a beta = 0.8, while Stock B has a beta = 1.6. Which of the following statements is CORRECT? a.Stock B's required return is double that of Stock A's. b.If the marginal investor becomes more risk averse, the required return on Stock B will increase by more than the required

The term "additional funds needed (AFN)" is generally defined as follows: a.Funds that are obtained automatically from routine business transactions. b.Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock, to support operations. c.The amount of assets required per dollar of sales. d.The amount of internally

The cash flows relevant for a foreign investment should, from the parent company's perspective, include the financial cash flows that the subsidiary can legally send back to the parent company plus the cash flows that must remain in the foreign country. a.True b.False Answer: False Answer: False Answer: False If a firm uses debt financing (Debt ratio

If a bank loan officer were considering a company's loan request, which of the following statements would you consider to be CORRECT? a.The lower the company's inventory turnover ratio, other things held constant, the lower the interest rate the bank would charge the firm. b.Other things held constant, the higher the days

Business risk is affected by a firm's operations. Which of the following is NOT directly associated with (or does not directly contribute to) business risk? a.Demand variability. b.Sales price variability. c.The extent to which operating costs are fixed. d.The extent to which interest rates on the firm's debt fluctuate. e.Input price variability. Answer: d Answer: d Answer: d A

Which of the following statements about convertibles is most CORRECT? a.The coupon interest rate on a firm's convertibles is generally set higher than the market yield on its otherwise similar straight debt. b.One advantage of convertibles over warrants is that the issuer receives additional cash money when convertibles are converted. c.Investors are willing to

Which of the following assumptions is embodied in the AFN equation? a.All balance sheet accounts are tied directly to sales. b.Accounts payable and accruals are tied directly to sales. c.Common stock and long-term debt are tied directly to sales. d.Fixed assets, but not current assets, are tied directly to sales. e.Last year's total assets were

Which of the following statements is most CORRECT? a.The primary test of feasibility in a reorganization is whether every claimant agrees with the reorganization plan. b.The basic doctrine of fairness states that all debt holders must be treated equally. c.Since the primary issue in bankruptcy is to determine the sharing of losses

Assume that the risk-free rate is 6% and the market risk premium is 5%. Given this information, which of the following statements is CORRECT? a.An index fund with beta = 1.0 should have a required return of 11%. b.If a stock has a negative beta, its required return must also be negative. c.An

Suppose Firms A and B have the same amount of assets, total assets are equal to total invested capital, pay the same interest rate on their debt, have the same basic earning power (BEP), finance with only debt and common equity, and have the same tax rate. However, Firm A

Confu Inc. expects to have the following data during the coming year. What is the firm's expected ROE? a.12.51% b.13.14% c.13.80% d.14.49% e.15.21% Answer: aRATIONALE: Answer: aRATIONALE: Answer: a RATIONALE: Your company, RMU Inc., is considering a new project whose data are shown below. What is the project's Year 1 cash flow? a.$ 8,903 b.$ 9,179 c.$ 9,463 d.$ 9,746 e.$10,039 Answer: c RATIONALE: Answer: c RATIONALE: Answer:

Which of the following statements is CORRECT? a.The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds. In other words, it is the growth rate at which the firm's AFN equals zero. b.If a firm's assets are growing at a positive rate, but its

Which of the following statements is CORRECT? a.Any forecast of financial requirements involves determining how much money the firm will need, and this need is determined by adding together increases in assets and spontaneous liabilities and then subtracting operating income. b.The AFN equation for forecasting funds requirements requires only a forecast of

Other things held constant, the lower a firm's tax rate, the more logical it is for the firm to use debt. a.True b.False Answer: False RATIONALE:This is false. The lower the tax rate, the less valuable the tax shelter from debt. Think about the cost of debt in the WACC: rd(1 - T).

A revolving credit agreement is a formal line of credit. The firm must generally pay a fee on the unused balance of the committed funds to compensate the bank for the commitment to extend those funds. a.True b.False Answer: True Answer: True Answer: True The fact that long-term debt and common stock are raised infrequently and

It is generally harder to transfer one's ownership interest in a partnership than in a corporation. a.True b.False Answer: True Answer: True Answer: True You just purchased a 12-year, $1,000 face value, zero coupon bond with a yield to maturity of 9%. If your tax rate is 25%, how much in taxes will you have to

A firm's ROE is equal to 9% and its ROA is equal to 6%. The firm finances only with short-term debt, long-term debt, and common equity, so assets equal total invested capital. The firm's total debt to total capital ratio must be 50%. a.True b.False Answer: FalseRATIONALE:Since assets = Total invested capital, Debt/Total

Which of the following statements is most CORRECT? a.A conglomerate merger is one where a firm combines with another firm in the same industry. b.Regulations in the United States prohibit acquiring firms from using common stock to purchase another firm. c.Defensive mergers are designed to make a company less vulnerable to a takeover. d.The equity

Assume that a firm currently has EBIT of $2,000,000, a degree of total leverage of 5, and a degree of financial leverage of 1.875. If sales decline by 20% next year, then what will be the firm's expected EBIT in one year? a.$361,000 b.$380,000 c.$400,000 d.$420,000 e.$441,000 Answer: c Determine DOL:DOL = DTL/DFLDOL = 4.000Determine change in

Stock X has a beta of 0.7 and Stock Y has a beta of 1.3. The standard deviation of each stock's returns is 20%. The stocks' returns are independent of each other, i.e., the correlation coefficient, r, between them is zero. Portfolio P consists of 50% X and 50% Y.

The cost of capital may be different for a foreign project than for an equivalent domestic project because foreign projects may be more or less risky. a.True b.False Answer: True Answer: True Answer: True Mike Flannery holds the following portfolio: What is the portfolio's beta? a.1.06 b.1.17 c.1.29 d.1.42 e.1.56 Answer: b RATIONALE: Answer: b RATIONALE: Answer: b RATIONALE: Firms use defensive tactics to fight off

Brookman Inc's latest EPS was $2.75, its book value per share was $22.75, it had 315,000 shares outstanding, and its debt/total invested capital ratio was 44%. The firm finances using only debt and common equity and its total assets equal total invested capital. How much debt was outstanding? a.$4,586,179 b.$4,827,557 c.$5,081,639 d.$5,349,094 e.$5,630,625 Answer: e RATIONALE: Answer:

Each stock's rate of return in a given year consists of a dividend yield (which might be zero) plus a capital gains yield (which could be positive, negative, or zero). Such returns are calculated for all the stocks in the S&P 500. A simple average of those returns (which gives

Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's

For markets to be in equilibrium, that is, for there to be no strong pressure for prices to depart from their current levels, a.The expected rate of return must be equal to the required rate of return; that is, . b.The past realized rate of return must be equal to the expected future

Which of the following is NOT a way risk management can be used to increase the value of a firm? a.Risk management can increase debt capacity. b.Risk management can help a firm maintain its optimal capital budget. c.Risk management can reduce the expected costs of financial distress. d.Risk management can help firms minimize taxes. e.Risk