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1) if a firm increases its use of financial leverage, then what would we generally expect
for the effect of that increased leverage to have on an eps that is already very low?
a.eps would be lower with financial leverage
b.eps would always be the same with financial leverage
c.eps would be higher with financial leverage
d.it is not possible to determine
2) alotacash venture capital fund currently has its money tied up in 12 investments. of
those investments 3 are expected to fail (i.e a return of -100%), and 6 are expected to
generate a zero return. the three remaining projects are supposed to yield a return of
70%, 83% and 167%, respectively. what is the average return on alotacashs
investments?
a.12.68%
b.-4.57%
c.8.93%
d.1.67%
3) emma internationa is considering retiring a $150 million bond issue sold to the
public 10 years ago. the original maturity was 30 years. if the bonds were initially sold
at 97, then what is the dollar amount of the unamortized discount that would be
accelerated at retirement?
a.$3,000,000
b.$ 150,000
c.$4,500,000
d.$4,650,000
4) the procedures for liquidating a corporation reside
a.in chapter 7 of the bankruptcy reform act of 1978
b.in chapter 11 of the bankruptcy reform act of 1978
c.common law
d.none of the above
5) borrower corp. has the ability to produce $4,000,000 of free cash flow next year and
expects that to grow by 2% per year thereafter. if borrowers weighted average cost of
capital is 13%, then what is the value of borrower?
a.$40,000,000.00
b.$30,769,230.77
c.$36,363,636.36
d.none of the above
6) consider the following information for smart products: total assets=$1000;
sales=$1540; net profit margin=12%; dividend payout ratio=40%; equity=$555. what is
smart products sustainable growth rate?
a.7%
b.13%
c.25%
d.52%
7) narrbegin: pickswinners
pickswinners venture fund
pickswinners venture fund invested $10 million five years ago in robotronics co. the
fund received 6 million shares of convertible preferred stock, each of which can be
converted into three shares of common stock. robotronic is now set to complete an ipo,
and its shares are being priced at $40 each. pickswinners will convert its preferred stock
to common at the ipo, and will sell its shares along with robotronic. the investment
banking firm handling the ipo will charge an 8% underwriting fee.
narrend
if pickswinners common stock position represents 40% of robotronics equity, how
many shares are being offered in the ipo?
a.15,000,000
b.18,000,000
c.25,200,000
d.45,000,000
8) a bond currently trades at $980 on the secondary market. the bond has 10 years until
maturity and pays a semiannual coupon at 9% apr of face value. the face value of the
bond is $1,000. what is the yield to maturity for this bond?
a.9.00%
b.9.18%
c.9.25%
d.9.31%
9) smith enterprises declares a 1-4 reverse stock split. if you own 600 shares of smith
stock, how many shares do you own after the split?
a.600
b.150
c.2400
d.1200
10) when a corporation offers shares to the public for the first time that is an:
a.ipo
b.ppo
c.npo
d.lbo
11) narrbegin: cash disbursements
bavarian brews schedule of projected cash disbursement
the companys purchases are 75% of its sales. of those purchases 15% are paid in cash,
50% are paid in the following month and the remainder in the month after that. the
companys wages and salaries equal 15% of sales each month plus $50. taxes of $125
are due in april. the company is going to purchase new machinery worth $1000 in
march and pay 50% right away and the rest in april. in addition, the company will pay a
$175 dividend in february.
narrend
what is the value of bavarian brew's accounts payable at the end of april?
a.$346.63
b.$500.63
c.$1,000.63
d.$754.63
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. 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 recaptured in full at the end
of year 4. the tax rate is 40%.
what is the initial cash outlay?
a.$300,000
b.$312,000
c.$232,000
d.$220,000
13) the sarbanes-oxley act of 2002
a.established the securities and exchange commission
b.requires ceo and cfos of all large companies to personally certify their firms financial
statements
c.defined ethical behavior
d.established that a cfo must be a member of the firms audit committee of the board of
directors
