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1) a portfolio has 40% invested in asset 1, 50% invested in asset 2 and 10% invested in
asset 3. asset 1 has a beta of 1.2, asset 2 has a beta of 0.8 and asset 3 has a beta of 1.8,
whats the beta of the portfolio?
a.1.27
b.0.80
c.1.06
d.1.20
e.cannot tell from given information
2) if a borrower violates a covenant the lender may:
a.demand immediate repayment
b.waive the violation and continue the loan
c.waive the violation but alter the terms of the original debt agreement
d.any of the above are possible
3) smith enterprises stock currently sells for $17.50. a put option on the stock has a
strike price of $20 and currently sells at $4.50. what is the intrinsic value of the option?
a.$0
b.$2.50
c.$2.00
d.$4.50
4) which of the following scenarios could be considered an example of an agency
problem.
a.management decides to close a plant to lower operating costs
b.management decides to go ahead with an expansion that is expected to benefit the
companys value
c.the board of directors rewards management for the companys last year performance
d.management decides to purchase a boeing 747 as a corporate plane
5) what is the present value of $25 to be received at the beginning of each year for the
next 6 years if the discount rate is 12%?
a.$125.00
b.$126.63
c.$115.12
d.none of the above
6) narrbegin: big diesel incorporated
big diesel incorporated
consider the following historical returns for big diesel incorporated:
narrend
consider the following historical returns for big diesel incorporated and inflation for the
united states economy:
what is the average real return for big diesel over the five-year time period?
a.2.92%
b.3.40%
c.4.00%
d.4.12%
7) if an acquirer wishes to keep the identity of a target after the acquisition, it most
likely will seek a
a.statutory merger
b.subsidiary merger
c.consolidation
d.none of the above allow the target to keep a separate identity
8) mendelson implements records the following cash flows at the end of each year for a
project. if the firm's discount rate is 11%, what is the future value of the project at the
end of the last year?
a.$2,547,837
b.$4,200,696
c.$4,293,253
d.$4,657,524
9) narrbegin: far corporation
far corporation
far corporation is considering a new project to manufacture widgets. the cost of the
manufacturing equipment is $150,000. the cost of shipping and installation is an
additional $15,000. the asset will fall into the 3-year macrs class. the year 1-4 macrs
percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. sales are expected
to be $300,000 per year. cost of goods sold will be 80% of sales. the project will require
an increase in net working capital of $15,000. at the end of three years, far plans on
ending the project and selling the manufacturing equipment for $35,000. the marginal
tax rate is 40% and far corporations appropriate discount rate is 12%.
narrend
refer to far corporation. what is the operating cash flow for year 2?
a.$55,470
b.$60,000
c.$48,798
d.$37,686
10) you are contemplating leasing a new car. the monthly lease payments (to be made at
the end of each months) are $299 for 36 months. at the end of the lease you have the
option of purchasing the car for $17,800. if you could buy the car today for $22,500,
what is the implicit interest on the lease?
a.9.942%
b..8285%
c.12.345%
d.7.852%
11) which of the following is not true about common stockholders and preferred
stockholders?
a.preferred stockholders receive a fixed dividend each year
b.common stockholders vote to elect the members of the board of directors
c.preferred stockholders have a more senior claim on the firms assets in the event of
bankruptcy
d.preferred stockholders are considered the firms ultimate owners
12) which of the following has the greatest potential to be the longest?
a.mail float
b.processing float
c.availability float
d.clearing float
13) the vast majority of initial public offerings have underwriting spreads that cost the
firm what percentage of the net capital raised?
a.0.5%
b.7.0%
c.7.5%
d.8.0%
14) you notice that a company has consistently paid a dividend of $.20 per quarter
except for the quarter one year ago when it paid $.52 when it had an unusually high
level of earnings that the company did not believe was going to be sustainable into the
future. such a pattern is most indicative of what kind of dividend policy?
a.constant payout ratio dividend policy
b.constant nominal payout dividend policy
c.target dividend payout ratio dividend policy
d.low-regular-and-extra policy dividend policy
