1) narrbegin: bavarian brew eps
bavarian brew eps
bavarian brew, an unlevered firm, has a perpetual ebit of $500,000. the required return
on assets for the firms assets is 10%. the company has 250,000 shares outstanding,
trading at $20 per share. the company is considering raising $1 million in debt with a
required return of 6% and would use the proceeds to repurchase 50,000 shares of
outstanding stock.
narrend
what are bavarian brews earnings per share before the restructuring? assume no
corporate taxes.
a.$2.50
b.$2.25
c.$2.00
d.$1.75
2) the yield on a one-year bond is 6% today and is expected to be 8.5% next year. based
on the expectations theory, what is the yield of a two year bond today?
a.15.01%
b.12.68%
c.5.67%
d.7.24%
3) narrbegin: efn 1
smith enterprises
narrend
if smith pays out 25% of their projected net income as dividends, what will be the
companys addition to retained earnings, if sales grow by 25% and all items on the
income statement grow proportionally with sales?
a.$222.75
b.$55.68
c.$167.07
d.$107.25
4) a decrease in accounts receivable will ____ net working capital.
a.increase
b.decrease
c.have no affect on
d.cannot be determined
5) as the discount rate increases, the npv of a project:
a.increases
b.decreases
c.is unaffected
d.cannot be determined with out knowing the discount rate
6) in the periods 2000-2010 the abnormal returns for the bidding firm was
a.-8.23%
b.-1.65%
c.21.92%
d.2.68%
7) emma international has earnings per share of $3.29; just paid dividend $1.25 and
expects a roi next year (and the foreseeable future) of 14% what is the expected growth
rate?
a. 1.22%
b. 5.32%
c.23.56%
d. 8.68%
8) the following are all examples of political risk that could affect a multinational
corporation, except
a.increasing taxes on a firms activities
b.employing quotas on the goods or services that a firm sells
c.implementing tax incentives to attract new corporations
d.implementing barriers that prevent a firm from repatriating profits back to their home
country
9) the annualized rate of interest on a three-month government bond in japan is 8% and
the rate on a similar instrument in the united states is 6%. the current spot rate is
$0.0079/¥. calculate the 3-month forward needed for interest rate parity to hold.
a.$0.00821/¥
b.$0.00786/¥
c.$0.00794/¥
d.$0.00805/¥
10) yesterday, in the wall street journal, the exchange rate between canadian and u.s.
dollars was $0.7347/c$. today the rate is $0.7432/c$. from yesterday to today the
canadian dollar ____ and the u.s. dollar ____ relative to one another.
a.depreciated; appreciated
b.was unchanged; was unchanged
c.appreciated; appreciated
d.appreciated; depreciated
11) which of the following factors do not have an impact upon a firm’s dividend policy?
a.transactions costs
b.taxes
c.the legal system in the firm’s home country
d.the stability of a firm’s earnings
e.all of the above have an impact on a firm’s dividend policy
12) you need to calculate the gains from using $1,000,000 of additional leverage on the
average company in the u.s. economy. you are told that the average investors personal
tax rate on income from stock is 15% and that investors can generally avoid personal
taxes on income from debt. you are also told that the average corporation is subject to
the 35% marginal corporate tax rate. what is the benefit to firm value for this additional
debt load?
a.$650,000
b.$447,500
c.$350,000
d.none of the above
13) calculate the required return for a project undertaken in italy given the following
information. the appropriate risk free rate is 5%, the project has a calculated beta of
1.35 relative to the italian stock market, and the market risk premium for the italian
stock market is 7%.
a.4.45%
b.5.0%
c.14.45%
d.9.45%
14) factors that influence the markets reaction to dividend policy do not include
a.the current level of a firms dividends
b.the volatility of the dividend stream over time
c.the income tax that investors must pay when they receive dividends
d.the historical level of dividends paid
15) which of the following, considered independently of the others, would increase the
cash conversion cycle?
a.an increase in inventory turnover
b.an increase in accounts receivable turnover
c.an increase in accounts payable turnover
d.a decrease in average age of inventory