All of the following constituencies would be considered stakeholders of a business
except:
A.management and employees.
B.suppliers and creditors.
C.the local community in which the business operates.
D.stockholders.
E.All of the groups listed above are stakeholders.
If the equity multiplier is 3, the debt ratio is:
A.66.67%.
B.33.33%.
C.2:1.
D.50.00%.
Which set of payments is the most valuable given 12% APR interest?
A.$100.00 received monthly for the next 12 months
B.$300.00 received quarterly for the next four quarters
C.$600.00 received semi-annually for the next two semi-annual periods
D.$1,200.00 received one year from today
Which of the following is not part of net working capital?
A.Accounts payable
B.Marketable securities
C.Retained earnings
D.Inventory
E.Accounts payable
Which of the following is accepted wisdom regarding the optimal capital structure?
A.For most firms, the optimal capital structure is somewhere between 30% and 50%
debt.
B.A firm with good profit prospects and little to no debt is probably missing an
opportunity by not using borrowed money if interest rates are reasonable.
C.Debt levels above 60% create excessive risk and should be avoided.
D.All of the above
Which of the following is not true regarding a company’s repurchase of its own stock?
A.All other things equal, the repurchase of stock should increase its market price.
B.Companies will only consider repurchasing their stock if they think it is undervalued.
C.Companies can repurchase their stock on the open market.
D.Companies can make a tender offer to current stockholders, normally at a premium.
E.If too many stockholders accept a tender offer, the company can buy a pro rata share
of those each stockholder offered.
Internet Corporation has EBIT of $1 million, 30% debt in their capital structure, and
total capital of $10 million. Their tax rate is 35%. What is their return on capital
employed (ROCE)?
A.6.5%
B.10.0%
C.33.33%
D.21.67%
Which of the following risk premiums apply to both corporate securities and federal
government securities?
A.Default risk only
B.Liquidity risk only
C.Maturity risk only
D.Both default risk and liquidity risk
E.Both liquidity risk and maturity risk
A company and its investment bank decide on the price and the number of shares that
will be offered in the IPO:
A.based on the trading response for its IPO Pop.
B.by estimating the expected future cash flows.
C.by estimating the level of investor demand during the road show.
D.by comparing with competitors’ market capitalizations.
The considerations associated with stock valuation do not include:
A.the expected future dividend performance of the stock.
B.the estimated selling time and price of the stock.
C.the exchange on which the stock is traded.
D.the market return on stocks of that type.
The following yields on 20-year bonds were quoted recently:
The difference in yields is due primarily to:
A.maturity risk premium.
B.default risk premium.
C.seniority risk premium.
D.financial risk premium.
Which of the following is most correct?
A.Stand-alone projects with positive NPV’s should always be accepted.
B.Mutually exclusive projects with positive NPV’s should always be accepted.
C.Projects can be mutually exclusive even if they address totally different business
issues.
D.Both a. and c. are correct.
E.All of the above are correct.
Holding all other variables constant, an increase in the cost of equipment at the
beginning of the project would affect which of the following?
A.Initial Outlay
B.Incremental cash flows
C.Opportunity costs
D.Both a & b