1) you would like to retire with $1 million on your 60th birthday. if you start saving
equal annual amounts on your 26th birthday, make your last deposit on your 60th
birthday, and earn 10% interest on your money, how much must you invest each year to
achieve your goal?
a.$3,343.06
b.$3,436.14
c.$3,558.41
d.$3,689.71
2) you are a venture capitalist that is going to invest $10 million dollars today in a firm
that is projected to be worth $100 million four years from today when it is expected to
have an initial public offering. if you require a 40% annual return on investments with
this kind of risk, then what portion of the equity of the firm should you own after the
investment?
a.10.00%
b.38.42%
c.40.00%
d.none of the above
3) an athlete was offered the following contract for the next three years:
year123
cashflow$5 million$7 million$9 million
the athlete would rather have his salary in equal amounts at the end of each of the three
years. if the discount rate for the athlete is 10%, what yearly amount would she consider
equivalent to the offered contract?
a.$5.37 million per year
b.$5.70 million per year
c.$6.71 million per year
d.$6.87 million per year
4) when the irr is equal to the discount rate, the npv is:
a.positive
b.equal to zero
c.negative
d.cannot be determined without knowing the discount rate
5) bavarian sausage has a beta of 1. the risk free rate is 5% and the expected market risk
premium is 12%. what is the companys cost of equity?
a.17.0%
b.26.6%
c.21.6%
d.13.5%
6) the european union adopted a continent-wide medium of exchange, the euro, as their
common currency. how many of the member countries of the eu are using the euro as
their current currency?
a.10
b.11
c.12
d.13
7) you are given the following information. what is the initial cash outflow?
a.$9,400
b.$9,000
c.$13,000
d.$10,600
8) firms that tend to do extensive credit checks on clients before offering credit are
more likely to be
a.firms with low variable costs
b.firms with high variable costs
c.firms with high fixed costs
d.none of the above
9) narrbegin: kooshy
narrend
suppose kooshy wishes to maintain a minimum $10 million cash balance, accounts
receivable are forecast to be 15% of sales, and inventory is expected to be 12% of
forecast sales. also, the firm plans to add $35 million to fixed assets (depreciate the
additional assets over seven years). what is the pro forma level of total assets if sales are
forecasted to increase 20%?
a.$487
b.$435
c.$519
d.$615
10) emma international needs $250 million in new equity capital; currently shares are
trading at $20 per share. morgan steely (the investment banker) requires a 4% spread of
the offer price which will be $19 per share and is fully subsribed at that price. the fixes
costs (legal, accounting, etc.) are estimated at $750,000. what is the net price per share
the firm will receive?
a.$19.20
b.$18.20
c.$18.24
d.$19.00
11) emma international has an ebit of $35 million, debt with a market value of $30
million and a required return on assets of 13%. assuming a corporate tax rate of 40%,
what is firm’s value?
a.$230,769,231
b.$281,230,769
c.$ 92,307,692
d.-$38,461,538
12) the growth rate at which a company can grow without issuing new shares of
common stock while maintaining a constant total asset turnover and equity multiplier is
called a(n)
a.internal growth rate
b.sustainable growth rate
c.optimal growth rate
d.maximal growth rate
13) a 60-day treasury bill is priced at a 4% discount rate. what is the bond-equivalent
yield of the security?
a.4.00%
b.4.03%
c.4.08%
d.6.67%
14) if the spot exchange rate is 110 yen per u.s. dollar, the fair forward exchange rate is
115 yen per u.s. dollar, and the risk-free borrowing rate in the united states is 2.5%,
what must the risk-free borrowing rate be in japan?
a.7.2%
b.5.6%
c.3.7%
d.0%
15) if, six months later at the completion of the merger, milners stock price has dropped
to $14 per share, what is the completed control premium percentage?
a.-44.0%
b.-15.15%
c.-0.50%
d.-2.0%
16) the expected outcomes of emma stock are below; what is the expected variance of
emma stock?
a.2.252%
b.0.051%
c.2.303%
d.0.053%
17) within a limited partnership context, what are the conditions on a limited partner?
a.there is a limit to the amount of capital that a limited partner can contribute, as
mandated by law
b.there is a limit to the number of limited partners that the firm may take on as investors
c.the limited partner must remain a low level employee and cannot ever serve in a
managerial role in the firm
d.a limited partner may not take any active role in the operation of the business
18) agreements between venture capital investors and portfolio-company management
allocating ownership stakes and voting rights to venture capitalists.
a.ownership right agreements
b.ratchet provisions
c.demand registration rights
d.participation rights
19) a company that seeks to pay a fixed dollar amount in dividends each period
a.will likely experience a decrease in its payout ratio over time
b.will likely experience an increase in its payout ratio over time
c.will likely experience stable additions to retained earnings over time
d.will likely violate capital impairment restrictions frequently
20) which of the following claims is first to be paid in a chapter 7 liquidation?
a.secured creditors
b.the federal government for taxes due
c.the expenses incurred by those administering the bankruptcy process
d.none of the above