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1) financial leverage:
a.results when a firm finances a portion of its assets with debt
b.can enhance a firm's earnings if sales increase
c.can impact the beta of the firm's stock
d.all of the above
e.only (a) and (b) are true
2) the hypothesis that states that it is nearly impossible to predict exactly when stocks
will do well relative to bonds is known as the:
a.fair price hypothesis
b.efficient market hypothesis
c.full information hypothesis
d.full price hypothesis
3) venture capital funding is usually not straight equity initially, but rather
a.senior debt
b.staged loan agreements
c.convertible debt or preferred stock
d.stock options
4) the idea that asset prices fully reflect all available information is known as the:
a.fair price hypothesis
b.efficient market hypothesis
c.full information hypothesis
d.full price hypothesis
5) narrbegin: smith int'l investment
smith enterprises international investment
smith enterprises is considering opening a new manufacturing plant in france. the cost
of the new plant will be 25 million and the plant is expected to generate after tax cash
flows of 10 million at the end of each year for the next 4 years. after that the plant will
be worthless. the current /$ exchange rate is 0.8166/$. the expected rate of inflation for
the u.s is 2.5% per year. the risk free rate in the u.s. is 4% and the risk free rate in france
is 6%.
narrend
refer to smith enterprises international investment. what is the cost of the manufacturing
plant in u.s. dollars?
a.$20,415,000
b.$25,760,000
c.$30,615,000
d.$32,340,000
6) your credit card carries a 9.9% annual percentage rate, compounded daily. what is the
effective annual rate, or annual percentage yield?
a.0.03%
b.9.90%
c.10.41%
d.18.00%
7) the risk-free rate is 5% and the expected return on the market portfolio is 13%. a
stock has a beta of 1.5, what is its expected return?
a.17%
b.12%
c.19.5%
d.24.5%
8) the operating cycle is composed of
a.the average age of a firms inventory
b.the average collection period
c.both a and b
d.none of the above
9) which of the following is considered an indirect cost of bankruptcy?
a.document printing expenses
b.professional fees paid to lawyers
c.loss of key employees
d.none of the above
10) within altmans z score model of predicting bankruptcy, working capital is included
in the model. if working capital increases what affect does that have on the probability
of the firm being in bankruptcy?
a.increases
b.remains the same
c.decreases
d.it is impossible to determine
11) you have a credit card with newbank. calculate the new balance as of january 10
after considering the finance charge for the month which is a 1.5% monthly rate based
on the average daily balance and the following purchases/payments. your outstanding
balance on december 10th is $423 and your statement extends from december 10
through january 10.
a.$1,346.52
b.$1,348.20
c.$1,328.00
d.$41,742
e.none of the above
12) narrbegin: exhibit 14-1
exhibit 13-1
you currently hold 100 shares of bavarian sausage, inc. stock which you purchased
three months ago at $25.50 and which is currently trading at $28. the stock will pay a
$3.75 dividend in a few days and the ex-dividend day is tomorrow. your personal tax
rate on dividend income is 25% and the capital gains tax is 15%.
narrend
refer to exhibit 14-1. if you decide to sell the stock after you received the dividend and
the dividend is fully reflected in the ex-dividend price, what is the total after tax return
on the investment?
a.6.86%
b.8.33%
c.11.45%
d.10.56%
