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Economics Chapter 1 An advantage of the corporate form of organization is that corporations
Chapter 01: An Overview of Financial Management True / False Note that there is an overlap between the T/F and multiple-choice questions, as some of the T/F statements are used in multiple-choice questions. Multiple Choice: True/False 1. In most corporations, […]
Economics Chapter 1 One drawback of forming a corporation is that it generally
Chapter 01: An Overview of Financial Management a. One drawback of forming a corporation is that it generally subjects the firm to additional regulations. b. One drawback of forming a corporation is that it subjects the firm’s investors to increased […]
Economics Chapter 10 “Capital” is sometimes defined as funds supplied to a firm
Chapter 10: The Cost of Capital 1. “Capital” is sometimes defined as funds supplied to a firm by investors. a. True b. False ANSWER: True DIFFICULTY: EASY REFERENCES: 10-1 An Overview of the Weighted Average Cost of Capital (WACC) QUESTION […]
Economics Chapter 10 You were recently hired by Scheuer Media Inc. to estimate its
Chapter 10: The Cost of Capital b. c. d. e. DIFFICULTY: MODERATE REFERENCES: 10-5 The Cost of Retained Earnings, rs QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.10.05 – The Cost of Retained Earnings, rs NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 […]
Economics Chapter 11 A firm should never accept a project if its acceptance would lead
Chapter 11: The Basics of Capital Budgeting 1. A firm should never accept a project if its acceptance would lead to an increase in the firm’s cost of capital (its WACC). a. True b. False ANSWER: False DIFFICULTY: EASY REFERENCES: […]
Economics Chapter 11 Capital budgeting and cost of capital
Chapter 11: The Basics of Capital Budgeting IRR = 11.76% b. c. d. e. DIFFICULTY: EASY REFERENCES: 11-3 Internal Rate of Return (IRR) QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.11.03 – Internal Rate of Return (IRR) NATIONAL STANDARDS: United States […]
Economics Chapter 11 You believe that the economy will soon fall into a mild recession
Chapter 11: The Basics of Capital Budgeting DATE MODIFIED: 6/23/2015 3:26 PM 48. Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. a. […]
Economics Chapter 12 Because of improvements in forecasting techniques
Chapter 12: Cash Flow Estimation and Risk Analysis 1. Because of improvements in forecasting techniques, estimating the cash flows associated with a project has become the easiest step in the capital budgeting process. a. True b. False ANSWER: False DIFFICULTY: […]
Economics Chapter 12 Both Require Initial Investment 11000 And Their
Web App 12E 1. Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000, and their risks are average for the firm. Project X has an expected life of 2 years with after-tax cash inflows […]
Economics Chapter 12 SML The Project With The Lower Risk should
Web App 12C 1. Sunshine Inc. has two equally-sized divisions. Division A has a beta of 0.8 and Division B has a beta of 1.2. The company is 100% equity financed. The risk-free rate is 6% and the market risk […]
Economics Chapter 12 The machine has a tax life of 5 years
Chapter 12: Cash Flow Estimation and Risk Analysis Cengage Learning Testing, Powered by Cognero Page 35 66. Liberty Services is now at the end of the final year of a project. The equipment originally cost $19,000, of which 75% has […]
Economics Chapter 12 Which of the following methods involves calculating an average
Web App 12D 1. Which of the following methods involves calculating an average beta for comparable firms and using that beta to determine a project’s beta? a. Risk premium method b. Pure play method c. Accounting beta method d. CAPM […]
Economics Chapter 12 Which one of the following would NOT result in incremental cash
Chapter 12: Cash Flow Estimation and Risk Analysis QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.12.01 – Conceptual Issues in Cash Flow Estimation NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.03 – […]
Economics Chapter 13 A firm’s business risk is largely determined by the financial characteristics
Chapter 13: Capital Structure and Leverage 1. A firm’s business risk is largely determined by the financial characteristics of its industry, especially by the amount of debt the average firm in the industry uses. a. True b. False ANSWER: False […]
Economics Chapter 13 The company’s fixed operating costs total $500,000 and its variable
Web App 13A 1. A company currently sells 75,000 units annually. At this sales level, its EBIT is $4 million, and its degree of total leverage is 2.0. The firm’s debt consists of $15 million in bonds with a 9.5% […]
Economics Chapter 13 Which of the following would be likely too
Chapter 13: Capital Structure and Leverage STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.10 – Capital structure TOPICS: Financial leverage and ratios KEYWORDS: Bloom’s: Application DATE CREATED: 6/23/2015 3:26 PM DATE MODIFIED: 8/26/2015 10:50 AM 51. Your firm is currently […]
Economics Chapter 13 You plan to invest in one of two home delivery pizza companies
Chapter 13: Capital Structure and Leverage e. DIFFICULTY: MODERATE REFERENCES: 13-2 Business and Financial Risk QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.13.02 – Business and Financial Risk NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States […]
Economics Chapter 14 Distribution Shareholders Dividends And Share
Chapter 14: Distribution to Shareholders: Dividends and Share Repurchases undervalued, or, alternatively, as a signal that the firm does not have many good investment opportunities. d. A company can repurchase stock to distribute a large one-time cash inflow, say from […]
Economics Chapter 14 How many of the old shares must be given up for
Chapter 14: Distribution to Shareholders: Dividends and Share Repurchases a. 46.71% b. 60.97% c. 36.88% d. 44.26% e. 49.17% ANSWER: e FEEDBACK: a. Capital budget $6,700 Net income (NI) $7,250 % Debt 45% % Equity = 1.0 – % Debt […]
Economics Chapter 14 Which The Following Statements Not Correct
Chapter 14: Distribution to Shareholders: Dividends and Share Repurchases 1. The optimal distribution policy strikes that balance between current dividends and capital gains that maximizes the firm’s stock price. a. True b. False ANSWER: True DIFFICULTY: EASY REFERENCES: 14-1 Dividends […]
Economics Chapter 15 Data on Shin Inc for last year are shown below
Chapter 15: Working Capital Management e. DIFFICULTY: MODERATE REFERENCES: 15-2 Current Asset Investment Policies QUESTION TYPE: Multiple Choice LEARNING OBJECTIVE S: FOFM.BRIG.17.15.02 – Current Assets Investment Policies NATIONAL STANDARD S: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United […]
Economics Chapter 15 Defined as current assets minus the difference between
Chapter 15: Working Capital Management 1. Net operating working capital, defined as current assets minus the difference between current liabilities and notes payable, is equal to the current ratio minus the quick ratio. a. True b. False ANSWER: False DIFFICULTY: […]
Economics Chapter 15 If a firm switched from taking trade credit discounts to paying
Chapter 15: Working Capital Management NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.12 – Working capital management TOPICS: DSO and past due accounts KEYWORDS: Bloom’s: Evaluation DATE CREATED: 6/23/2015 3:27 PM […]
Economics Chapter 15 Multinational financial management requires that financial analysts
Chapter 15: Working Capital Management d. $79,781 e. $93,589 ANSWER: b FEEDBACK: a. Purchases $800,000 Net days 50 Discount % 2% Days to payment 50 Discount days 15 Days/Year 365 Purchases/day = $800,000/365 = $2,192 Avg. trade credit = Average […]
Economics Chapter 16 The CFO Uses This Equation Forecast Inventory Requirements
Chapter 16: Financial Planning and Forecasting NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.05 – DISC: Financial analysis and cash flows TOPICS: Additional funds needed KEYWORDS: Bloom’s: Comprehension DATE CREATED: 6/23/2015 […]
Economics Chapter 16 The Company Reduces Its Dividend Payout Ratio d
Chapter 16: Financial Planning and Forecasting 1. The first, and most critical, step in constructing a set of forecasted financial statements is the sales forecast. a. True b. False ANSWER: True DIFFICULTY: EASY REFERENCES: 16-2 The Sales Forecast QUESTION TYPE: […]
Economics Chapter 17 A currency trader observes the following quotes in the spot market
Chapter 17: Multinational Financial Management TOPICS: Cross rates KEYWORDS: Bloom’s: Evaluation DATE CREATED: 6/23/2015 3:27 PM DATE MODIFIED: 9/3/2015 9:41 AM 35. A currency trader observes the following quotes in the spot market: 1 U.S. dollar = 1.34 Japanese yen […]
Economics Chapter 17 The new CFO believes that the company could improve its working
Chapter 17: Multinational Financial Management 1. Multinational financial management requires that financial analysts consider the effects of changing currency values. a. True b. False ANSWER: True DIFFICULTY: EASY REFERENCES: 17-2 Multinational Versus Domestic Financial Management QUESTION TYPE: True / False […]
Economics Chapter 2 Since we still do not have the Cengage Business School Outcomes
Chapter 02: Financial Markets and Institutions Note that there is an overlap between the T/F and multiple-choice questions, as some of the T/F statements are used in multiple-choice questions. Multiple Choice: True/False 1. A financial intermediary is a corporation that […]
Economics Chapter 3 Bond Issued The State Pennsylvania Provides
Chapter 03: Financial Statements, Cash Flow, and Taxes ANSWER: a FEEDBACK: a. Cash $100 Accounts payable $200 Accounts receivable 650 Accruals 135 Inventory 550 Notes payable 565 Current assets $1,300 Current liabilities $ 900 Net fixed assets 1,000 Long-term debt […]
Economics Chapter 3 Ebit Would Increase c The Firms Reported 2015
Chapter 03: Financial Statements, Cash Flow, and Taxes d. Operating income is derived from the firm’s regular core business. Operating income is calculated as Revenues less Operating costs. Operating costs do not include interest or taxes. e. Depreciation is not […]
Economics Chapter 3 Financial Analysis And Cash Flows united States
Chapter 03: Financial Statements, Cash Flow, and Taxes b. 4.80% c. 6.15% d. 6.28% e. 6.22% ANSWER: c FEEDBACK: a. Municipal bond yield 4.00% Tax rate 35.00% Municipal yield = After-tax bond yield 4.00% = BT yield (1 – T) […]
Economics Chapter 3 She claims one exemption of $4,000 for herself
Chapter 03: Financial Statements, Cash Flow, and Taxes d. $29,520 e. $24,720 ANSWER: c FEEDBACK: a. Tax rate 40% EBT After Unused Carry-Forward Forward Carryable Year Taxable Income Used Applied Amount 2009 $50,000 $0 $50,000 $0 2010 $40,000 $0 $40,000 […]
Economics Chapter 3 Which The Following Statements Correct The
Chapter 03: Financial Statements, Cash Flow, and Taxes This chapter has a lot of definitions. They are important, but we don’t like to make students memorize too many of them early in the course. We let our students use the […]
Economics Chapter 4 Since Its margin Already Higher This Indicates That
Chapter 04: Analysis of Financial Statements To keep this chapter from involving too much memorization, we provide our students with a formula sheet for use on exams. That makes a few of the questions trivially easy, but most require some […]
Economics Chapter 4 The new CFO believes the firm has excessive fixed assets
Chapter 04: Analysis of Financial Statements b. c. d. e. DIFFICULTY: MODERATE REFERENCES: 4-7 Tying the Ratios Together: The DuPont Equation QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.04.07 – Tying the Ratios Together: The DuPont Equation NATIONAL STANDARDS: United States […]
Economics Chapter 4 Whether or not students are provided with a formula sheet and
Chapter 04: Analysis of Financial Statements term debt, use the funds to buy back stock, and raise the equity multiplier to 2.0. The size of the firm (assets) would not change. She thinks that operations would not be affected, but […]
Economics Chapter 4 Which The Following Statements Correct Even
Chapter 04: Analysis of Financial Statements STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.05 – DISC: Financial analysis and cash flows TOPICS: Equity multiplier and leverage KEYWORDS: Bloom’s: Analysis DATE CREATED: 6/23/2015 3:24 PM DATE MODIFIED: 6/23/2015 3:24 PM 48. […]
Economics Chapter 5 He wants to withdraw $35,000 at the end of each year
Chapter 05: Time Value of Money ANSWER: a FEEDBACK: a. BEGIN Mode N 25 I/YR 7.5% PV $955,000 FV $0.00 PMT $79,696.46 b. c. d. e. DIFFICULTY: MODERATE REFERENCES: 5-10 Finding Annuity Payments, Periods, and Interest Rates QUESTION TYPE: Multiple […]
Economics Chapter 5 His Invested Funds How Much Could
Chapter 05: Time Value of Money QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.05.04 – Finding the Interest Rate, I NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.04 – Time value of […]
Economics Chapter 5 how much was your original deposit
Web App 5A 1. If you receive $15,000 today and can invest it at a 4.25% annual rate compounded continuously, what will be your ending value after 20 years? a. $41,060.80 b. $43,517.43 c. $35,094.70 d. $28,426.71 e. $36,849.44 ANSWER: […]
Economics Chapter 5 Time Value of Money Note that there is an overlap between
Chapter 05: Time Value of Money Note that there is an overlap between the T/F and multiple-choice questions, as some of the T/F statements are used in multiple-choice questions. Multiple Choice: True/False 1. Starting to invest early for retirement increases […]
Economics Chapter 5 Which of the following statements regarding a 30-year monthly
Chapter 05: Time Value of Money DIFFICULTY: MODERATE REFERENCES: 5-18 Amortized Loans QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.05.18 – Amortized Loans NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.04 – […]
Economics Chapter 5 You have arranged to finance the remainder with a 30-year
Chapter 05: Time Value of Money Amount borrowed $30,000 Interest per day $6.04167 Interest per month = Interest/day × 30 = $181.25 b. c. d. e. DIFFICULTY: MODERATE REFERENCES: 5-17 Fractional Time Periods QUESTION TYPE: Multiple Choice LEARNING OBJECTIV ES: […]
Economics Chapter 6 What Determines the Shape of the Yield Curve
Chapter 06: Interest Rates LEARNING OBJECTIVES: FOFM.BRIG.17.06.05 – What Determines the Shape of the Yield Curve? NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.02 – Financial markets and interest rates TOPICS: […]
Economics Chapter 6 What Rate of Return Would You Expect 5year
Chapter 06: Interest Rates b. Reinvestment rate risk is lower, other things held constant, on long-term than on short-term bonds. c. The pure expectations theory of the term structure states that borrowers generally prefer to borrow on a long– term […]
Economics Chapter 6 Which The Following Statements Correct The
Chapter 06: Interest Rates The difficulty of these questions as seen by students will depend on (1) what was discussed in class and (2) how long students have to answer the questions. If time is not an issue, then many […]
Economics Chapter 7 A Treasury bond has an 8% annual coupon and a 7.5%
Chapter 07: Bonds and Their Valuation DIFFICULTY: MODERATE REFERENCES: Comprehensive QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.07.00 – Comprehensive NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – OH – DISC.FOFM.BRIG.17.01 – Stocks and bonds […]
Economics Chapter 7 But while the first year’s interest is taxable at
Web App 7A 1. Which of the following statements is CORRECT? a. If interest rates increase, a 10-year zero coupon bond’s price will drop by a greater percentage than will a 10– year, 8% coupon bond. b. One nice thing […]
Economics Chapter 7 What is the yield to maturity on these bonds
Chapter 07: Bonds and Their Valuation c. d. e. DIFFICULTY: EASY REFERENCES: 7-3 Bond Valuation QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.07.03 – Bond Valuation NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – OH […]
Economics Chapter 7 What would be the priority of the claims as to the distribution
Web App 7C 1. Chapter 7 of the Bankruptcy Act is designed to do all of the following EXCEPT: a. Provides safeguards against the withdrawal of assets by the owners of the bankrupt firm. b. Allows insolvent debtors to discharge […]
Economics Chapter 7 If a firm raises capital by selling new bonds
Chapter 07: Bonds and Their Valuation 1. If a firm raises capital by selling new bonds, it could be called the “issuing firm,” and the coupon rate is generally set equal to the required rate on bonds of equal risk. […]
Economics Chapter 8 Company Has Less Market Risk Than Company
Chapter 08: Risk and Rates of Return 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 premium remains unchanged, the required […]
Economics Chapter 8 The tighter the probability distribution of its expected future
Chapter 08: Risk and Rates of Return 1. The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation. a. True b. False ANSWER: False DIFFICULTY: EASY […]
Economics Chapter 8 What will the portfolio’s new beta be
Chapter 08: Risk and Rates of Return TOPICS: Portfolio beta KEYWORDS: Bloom’s: Analysis DATE CREATED: 6/23/2015 3:25 PM DATE MODIFIED: 6/23/2015 3:25 PM 127. Jill Angel holds a $200,000 portfolio consisting of the following stocks. The portfolio’s beta is 0.88. […]
Economics Chapter 9 A stock is expected to pay a dividend of $0.75 at the end
Chapter 09: Stocks and Their Valuation ANSWER: e DIFFICULTY: MODERATE REFERENCES: 9A Stock Market Equilibrium QUESTION TYPE: Multiple Choice LEARNING OBJECTIVES: FOFM.BRIG.17.09.09A – Stock Market Equilibrium NATIONAL STANDARDS: United States – BUSPROG.FOFM.BRIG.17.03 – BUSPROG: Analytic STATE STANDARDS: United States – […]
Economics Chapter 9 For Stock Equilibrium That Is For
Chapter 09: Stocks and Their Valuation 1. A proxy is a document giving one party the authority to act for another party, including the power to vote shares of common stock. Proxies can be important tools relating to control of […]
Economics Chapter 9 Wang Inc.’s total corporate value is $750 million
Chapter 09: Stocks and Their Valuation intrinsic value. The firm’s WACC is 10.00%, its end-of-year free cash flow (FCF1) is expected to be $70.0 million, the FCFs are expected to grow at a constant rate of 5.00% a year in […]