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1) narrbegin: needsalift aprs
needsalift, inc. aprs
needsalift, inc. has $10 million in funds to distribute to its unsecured creditors. two sets
of possible claims are presented below.
narrend
for case ii, what settlement will the accounts payable holders receive?
a.$3 million
b.$3.34 million
c.$4.65 million
d.$6 million
2) narrbegin: bavarian-bavarian merger
bavarian-bavarian merger
bavarian brew is planning on acquiring bavarian sausage in a pure exchange merger.
bavarian brews stock is currently trading at $45 and they set the exchange ratio at 1.80.
bavarian sausage has 75 million shares outstanding which are currently trading at $23 a
share.
twelve months after the merger bavarian brews stock price drops to $37.
narrend
what is the transaction value of the merger for bavarian brew?
a.$3.375 billion
b.$6.075 billion
c.$135 million
d.$1.350 billion
3) which statement is false regarding empirical evidence of capital structures?
a.capital structures show strong industry patterns
b.economy wide leverage ratios are consistent across countries
c.leverage ratios are negatively related to the cost of financial distress
d.within industries, the most profitable companies borrow the least
4) most of the short-term capital gains of share privatization ipos are captured by
a.investors and citizens who vote in the country of the firm that is being privatized
b.the investor base that is determined to pay the maximum price for the ipo
c.the international monetary fund that helped inject much of the initial capital for the
initial start up
d.none of the above
5) a bank service that provides early notification of checks that will be presented
against a companys account on a given day is called
a.a controlled disbursement
b.a positive pay disbursement
c.an integrated accounts payable
d.none of the above
6) a business such as a restaurant, that receives local checks, cash, and debit card
payments is more likely to utilize a(n)
a.field-banking system for collections
b.mail-based system for collections
c.electronic system for collections
d.lockbox system for collections
7) narrbegin: big diesel incorporated
big diesel incorporated
consider the following historical returns for big diesel incorporated:
narrend
refer to big diesel incorporated. what is the average return over the five year time
period?
a.6.00%
b.6.20%
c.6.40%
d.6.60%
8) the expected rate of inflation in japan is 12% and the expected rate of inflation in
italy is 9%. in italy the risk-free rate of interest is 6%. what does the risk-free rate of
interest have to be in japan for real interest rate parity to hold?
a.3.16%
b.8.92%
c.6.0%
d.12.0%
9) you are offered a security that will pay you $2,500 at the end of the year forever. if
your discount rate is 8%, what is the most you are willing to pay for this security?
a.$26,686
b.$62,500
c.$50,000
d.$31,250
10) if a bank lends you $10,000 and requires that you make payments of $2,500 at the
end of each of the next five years, what interest rate is the bank charging?
a.4.56%
b.5.61%
c.7.93%
d.11.18%
11) consider the following: the market value of louis stock is $15 a share (with
5,000,000 shares outstanding and the next annual dividend is expected to be $1.25), the
bonds are currently selling for $920 (semi-annual coupon payments of $30; maturing in
20 years; 200,000 bonds in the market), the preferred stock currently is $25 per share
(paying dividends of $3 in perpetuity, 100,000 shares outstanding); if the tax rate is
40%, what is the firms wacc?
a.6.81%
b.7.26%
c.9.07%
d.7.81%
12) consider a project with the following cash flows.
whats the irr of the project? if a firms cost of capital is 15%, should the firm accept the
project?
a.50%; accept the project
b.12.5%; reject the project
c.12.5% and 50%; accept the project
d.12.5%, and 50%; reject the project
13) a standardized measure of risk is:
a.alpha
b.beta
c.gamma
d.omega
14) which of the following statements is true?
a.the use of debt may lead to financial distress and bankruptcy, thus firms that sell
expensive, durable products that may have warranties and ongoing service requirements
tend to use less debt
b.the use of debt may lead to financial distress and bankruptcy, thus firms that sell
expensive, durable products that may have warranties and ongoing service requirements
tend to use more debt
c.companies with a large proportion of tangible assets should be more willing to use
debt than firms with mostly intangible assets
d.companies with a large proportion of tangible assets should be less willing to use debt
than firms with mostly intangible assets
e.both (a) and (c)
15) one reason that a u.s. based firm might want to issue its equity in international
markets is
a.that the firm will be able to raise markedly more capital, through a much higher
security price, in the international markets
b.that an international issue may help a company integrate itself into a international
local business scene
c.that u.s. securities law states that international ownership has no voting rights
d.none of the above
16) a high degree of operating leverage suggests that
a.a small percentage increase in sales leads to a large percentage increase in earnings
before interest and taxes
b.a small percentage increase in sales leads to an identical percentage increase in
earnings before interest and taxes
c.a large percentage increase in sales leads to a small percentage increase in earnings
before interest and taxes
d.none of the above
17) emma international has earnings per share of $3.29; just paid dividend $1.25 and
expects a roi next year (and the foreseeable future) of 14% what is the expected next
year dividend?
a.$1.359
b.$1.316
c.$1.259
d.not enough information
18) you were just hired as the ceo of a company. your primary objective should be
a.to maximize the companys earnings
b.to maximize profits
c.to maximize the companys price of common stock
d.to eliminate the companys competitors
19) choc-lattes corp. earned $5.00 per share in 2006, and paid a dividend of $2.00 per
share. if it earns $5.50 in 2007 and follows a constant payout ratio policy, its dividend
will be
a.$3.30
b.$3.00
c.$2.20
d.$2.00
