1) if the spot rate for the yen/ dollar is ¥110.00 and the forward rate is ¥111.00 then the
yen trades at
a.a forward discount of .009091 to the dollar
b.a forward premium of .009091 to the dollar
c.a forward discount of .009009 to the dollar
d.a forward premium of .009009 to the dollar
2) roxy international has an ebit of $25 million, debt with a market value of $40 million
and a required return on assets of 15%. assuming no taxes, what is the firm ‘s value?
a.$166,666,667
b.$266,666,667
c.$291,666,667
d.$100,000,000
3) suppose a firms creditors decide that replacing current management is a requirement
in a voluntary reorganization. this is called
a.an extension reorganization
b.a composition reorganization
c.a creditor control reorganization
d.a cram-down reorganization
4) a project will generate a real cash flow three years from now of $100,000. if the
nominal discount rate is 10% and expected inflation is 3%, what is the nominal cash
flow for year 3?
a.$112,551
b.$106,090
c.$109,273
d.$122,504
5) a bottom-up approach to sales forecasting begins with
a.a firmwide sales objective
b.a departmental head forecast
c.a talk with the customer
d.none of the above
6) a corporation is a separate legal entity. what consequences does that have for the
corporation?
a.it can sue and be sued
b.they can own property
c.a only
d.a and b
7) abc stock is currently trading at $28. a call option on abc with a strike price of $30
and 3 months to expiration trades for $2.75. in order for the option to be considered in
the money at expiration, abc stuck must:
a.be greater than $30.75
b.be greater than $32.75
c.be greater than $30
d.be less than $27.25
8) a mixed offering is a merger that is financed with
a.debt and equity
b.cash and securities
c.debt and trade credit
d.none of the above
9) which of the following should have the greatest value if the discount rate applying to
the cash flows is a positive value?
a.the present value of a $5 payment of to be received one year from today
b.the future value of a $5 payment received today but invested for one year
c.the present value of a stream of $5 payments to be received at the end of the next two
years
d.the future value of a stream of $5 payments to be received at the end of the next two
years
10) you are contemplating purchasing a $1,000,000 181 day t-bill that is selling at a
discount of 4.25%. what is the dollar discount on the t-bill?
a.$21,368.06
b.$42,500
c.$38,845.26
d.$19,367.51
11) special post office boxes set up by the firm to expedite the receipt and processing of
its accounts receivables are called
a.safety-deposit boxes
b.lockboxes
c.float reducers
d.none of the above
12) narrbegin: exhibit 9-2
exhibit 9-2
the following data are projected for a possible investment project:
narrend
refer to exhibit 9-2. the project requires an initial investment of $300,000 on equipment.
working capital is anticipated to be variable at 10% of revenues; the working capital
investment must be made at the beginning of each period, and will be recovered in full
at the end of year 4. equipment will be sold at its book value at the end of year 4. the tax
rate is 40%.
what is the net present value of the project if the firms discount rate is 10%?
a.-$20,225
b.-$41,731
c.$24,155
d.$26,570
13) narrbegin: never-crash airlines
never-crash airline
never-crash airline has a capital structure that consists of 30% debt and 70% equity. the
companys cost of debt is 7%. the company has a beta of 1.9. the risk free rate equals
4.5% and the expected return on the market portfolio is 15%.
narrend
what is the never-crash airlines cost of equity?
a.33.00%
b.7.05%
c.24.45%
d.28.50%
14) roxy is buying a house and the mortgage terms are 30 years, monthly payments. if
the interest rate is 7% (apr), the loan is $300,000 loan, what is the balance of the loan
after the seventh payment?
a.$300,000
b.$298,248
c.$286,028
d.$275,568
15) investors should expect to be compensated for bearing ____ risk, but they should
not expect to be compensated for bearing ____ risk.
a.unsystematic; systematic
b.systematic; unsystematic
c.co-movement; systematic
d.unsystematic; co-movement
e.total risk; unsystematic
16) consider the adjusted closing prices for ma stock
what is the variance of returns for ma stock?
a.0.003
b.0.004
c.0.060
d.0.052
17) if you are an investor that owns shares in a firm that you believe is about to issue
additional equity, then you would expect the price of your shares to
a.increase
b.be unaffected
c.decrease
d.all three of the above could happen with equal probability
18) narrbegin: “flip” shares 2
“flip” shares 2
three companies went public last month with initial public offerings (ipo). an investor
was able to purchase shares of each company at the offer price and then flip the shares
at the end of the day for the full return. the shares of each company sold for a $20 offer
price. the number of shares purchased and the first day return are shown below.
stockshares
boughtfirst day
narrend
refer to “flip” shares 2. what was the dollar value of the ipo investment after the first
day? (ignore any tax implications for this question)
a.$4,493
b.$4,477
c.$4,455
d.$4,400
19) the dividend policy model that assumes that managers use dividends to covey
positive information to shareholders is called the . . .
a.agency cost model
b.contracting cost model
c.signaling model
d.none of the above