1) which of the following roles does finance play in long-term planning?
a.identifying problems that could develop if the firm’s strategic plans do not develop as
expected
b.evaluating the firm’s existing and prospective sources of funding
c.risk management
d.all of the above
e.(a) and (b) only
2) which of the following does not represent a career opportunity in money
management?
a.portfolio manager
b.securities analyst
c.financial planner
d.capital budgeting analyst
3) the uncertainty caused by the variability of a firms cash flows is called . . .
a.financial risk
b.business risk
c.financial leverage
d.none of the above
4) which piece of legislation was enacted to prevent the formation of trusts?
a.the clayton act
b.the federal trade commissions act
c.the sherman antitrust act
d.the celler-kefauver act
5) narrbegin: efn 1
smith enterprises
narrend
using the percentage of sales method what will be smiths net income if sales are
expected to increase by 25%?
a.$222.75
b.$562.50
c.$225.00
d.$337.50
6) if the current spot exchange rate on the euro is $1.2812/ and the two year risk free
rate for borrowing in dollars is 3% and 4% for borrowing in euros, what should be the
two year $/ forward exchange rate?
a.1.2689
b.1.2812
c.1.2567
d.1.2469
7) narrbegin: smith-miler merger
smith-miler merger
smith enterprises can acquire miller, inc for $250,000 in either cash or stock. both
companies are 100% equity financed. the synergy value of the acquisition for smith is
$35,000. currently smith has 25,000 shares outstanding which trade at $29 a share,
whereas miller has 15,000 shares outstanding that trade at $14 a share.
narrend
for smith and miller, what is the stock price of the new firm after a cash acquisition?
a.$29
b.$28.80
c.$18
d.$21.50
8) consider the adjusted closing prices for roxy stock
what is the standard deviation of returns for roxy stock?
a.0.005
b.0.007
c.0.081
d.0.070
9) a particular stock has an expected return of 11%. if the expected risk premium on the
market portfolio is 8%, and the risk-free rate is 5%, whats the stocks capm beta?
a.1.375
b.0.750
c.0.846
d.0.462
10) an investor that writes a covered call
a.receives a premium for the option he sells
b.speculates that the stock price will increase above the strike price
c.benefits if the stock price increases above the strike price
d.pays a premium to the call seller for downside protection on his stock
11) a change in corporate control brought about by the creation of new shares with
special voting rights is a(n)
a.management buyout
b.employee stock ownership plan
c.dual-class recapitalization
d.florida
12) emma industries records the following cash flows at the end of each year for a
project. if the firm’s discount rate is 11%, compounded continously, what is the present
value of the project?
a.$2,509,507
b.$2,547,837
c.$2,517,234
d.$2,499,159