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1) narrbegin: cash budget
bavarian brews schedule of projected cash disbursement
all of bavarian brews sales are credit sales. the company collects 60% of its sales in the
next month and the remainder in the month after that.
narrend
due to a change in economic conditions bavarian brew will only be able to collect 40%
of its march sales in april. what is the effect on the companys cash receipts in april as a
result of this change?
a.cash receipts decline by $180
b.cash receipts decline by $90
c.cash receipts increase by $270
d.cash receipts increase by $90
2) which statement best describes the capital structure decision process for a firm?
a.the firm finds the least expensive debt to finance its projects
b.the firm finds the mix of debt and equity to maximize firm value
c.the firm purchases the mix of debt and equity to match the guidelines of the company
charter
d.the firm makes the necessary filings for an initial public offering
3) a put on united pipeline has 1 year to maturity and a strike price of $45. if an investor
purchases that option for $3.25 then in order for the investor to break even, united
pipelines stock price on the expiration date must equal
a.$45
b.$48.25
c.$41.75
d.none of the above
4) u.s. firms reorganizing under chapter 11 have the right to terminate underfunded
pension plans. who picks up the uncovered pension costs?
a.no one, the pension plan fails
b.the u.s. government's pension benefit guaranty corporation
c.the u.s. government's pension recovery plan
d.the stockholders of the firm being reorganized
e.none of the above
5) which of the following statements is true?
a.speculators do irreparable harm in general to the foreign exchange market
b.speculators help make the foreign currency market more liquid and more efficient
c.speculators help make the foreign currency market less liquid and less efficient
d.governments that attempt to maintain a fixed exchange rate must generally intervene
less frequently than those that have floating exchange rates
6) nalcoa corp. is financing a project that is in the same industry as its current portfolio
of projects. if nalcoa has a beta of 1.5 and the expected market risk premium is 8%
while the risk-free rate is 5% then what is the weighted average cost of capital for
nalcoa if it is, and plans to continue to be an all equity financed firm?
a.9.5%
b.13.0%
c.17.0%
d.there is not enough information to calculate the wacc
7) which group is the largest source of external seed and start-up capital for american
businesses?
a.venture capital limited partnerships
b.institutional venture capital funds
c.angel capitalists
d.small business investment companies
8) a certain investment will require an immediate cash outflow of $3 million. at the end
of each of the next three years, the investment will generate cash inflows of $1.3
million. if the discount rate is 10%, what is the projects npv?
a.$211,734
b.-$303,886
c.$232,908
d.-$276,260
9) if the required return on the stock investment is 13%, what should be millers stock
price immediately after the first dividend was paid?
a.$6.24
b.$19.69
c.$16.28
d.$21.19
10) on-the-fence co. (otf) is considering issuing an additional $5,000,000 perpetual
debt. it is subject to a 35% marginal corporate tax rate but is being told that the costs of
financial distress on that additional debt is $1,000,000. what should otf do?
a.do not issue the debt
b.issue the debt
c.it doesnt matter what it does as m&m with perfect markets holds
d.none of the above
11) which of the following are listed as a common fraud prevention measures?
a.using positive pay services
b.separating check-issuance duties (approval, signing and reconciliation)
c.increasing the use of electronic payment methods
d.using safety measures on checks such as microprinting and watermarks
e.all of the above are listed as common fraud prevention measures
12) you notice that the spot price of beef loin is $30 per pound and the 9-month forward
rate is $32.66 per pound. what is the annualized 9-month risk free rate of interest?
a.6.58%
b.8.87%
c.10.00%
d.12.00%
13) observing the following term structure; a us treasury bond maturing in 1 year has a
yield of 3% while us treasury bond maturing in 2 years has a yield of 7%; what is the
expected 1 year rate, 1 year from now?
a.10.16%
b.11.00%
c.11.16%
d.11.23%
14) which of the following is true concerning transfer mechanisms?
a.the firm must choose the mechanism that offers the highest earnings on the increased
funds' availability
b.the firm must choose the mechanism that offers the lowest costs
c.the firm must balance the marginal costs vs. the marginal benefits and select the one
with the highest marginal profit
d.in practice, most companies use wire transfers for large transfers of funds from
lockbox systems and edts for high-volume, low-dollar transfers from small deposit
banks
e.both (c) and (d) are true
15) permits consumers to repay all or a portion of their debts over time rather than go
through liquidation
a.chapter 9
b.chapter 12
c.chapter 13
d.chapter 15
16) bavarian brew issued convertible bonds with a par value of $1,000. the conversion
ratio on the bonds is 12.33, the current market price of the bonds is $933.75 and the
underlying stock currently sells at $45.25. what is the conversion premium?
a.66.48%
b.45.25%
c.74.67%
d.27.58%
17) if the law of one price holds and the price of an apple in the u.s. is $1.50 while the
price of an apple in japan is ¥174.00, then what should the spot exchange rate for ¥/$
be?
a..0086
b..5747
c.116.00
d.none of the above
18) an instrument that gives the holder the right to purchase a certain number of shares
of a firm's common stock at a specified price over a certain period is known as a(n):
a.eurocurrency loan
b.treasury bill
c.syndicated loan
d.term loan
e.stock purchase warrant
