An Allied Northern preferred stock pays a $3.84 annual dividend. What is the value of
the stock at a 9.5 percent return?
A.$40.42
B.$42.67
C.$38.40
D.none of the above
Financial markets have the basic function of:
A.providing liquidity.
B.providing signaling and information.
C.matching savers and users of funds.
D.All the above
When MM theory recognizes taxes and bankruptcy costs, firm value:
A.is unaffected by financial leverage.
B.steadily increases with financial leverage.
C.steadily decreases with financial leverage.
D.initially increases but then decreases as financial leverage rises.
Which of the following is not a factor that makes valuing a target’s stock difficult and
imprecise?
A.It’s hard for an acquirer to get an accurate forecast of the target’s future cash flows.
B.Terminal values vary dramatically in response to small changes in assumptions.
C.The acquirer’s management generally doesn’t know anything about the target’s line of
business.
D.Estimating a risk adjusted discount rate for the analysis is inherently imprecise.
Which of the following formulas can be used to solve amount problems?
A.FV = PV[FVFk,n]
B.FV = PV[1+k]
C.PV = FV[1+k]-n
D.PV = FV[PVFk,n]
E.All of the above
Recent thinking in theoretical finance grapples with the issue of risk and return for
combinations of stocks. This theory is called:
A.portfolio theory.
B.expectations theory.
C.efficient market theory.
D.All of the above
Yang Centers wants to report at least $1.75 in earnings per share. Given the following
information, how much debt should be in its capital structure?
A.$457,142
B.$520,050
C.$2,800,000
D.$3,461,538
____ are traded in capital markets.
A.Only stocks
B.Only bonds
C.Long-term bonds and stocks
D.Only short-term bonds
A negative NPV indicates that a project:
A.has an IRR that exceeds the cost of capital.
B.is overpriced.
C.will reduce the value of a firm if accepted.
D.b and c
E.None of the above
Bryan & Bales has just declared a 15% stock dividend. The current price of the stock is
above the par value. All other things being equal, which of the following account
balances will be affected by the stock dividend?
A.Common Stock
B.Paid in Excess
C.Retained Earnings
D.All of these account balances will be affected
E.None of these account balances will be affected.
The price premium in a merger is the difference between the price offered for the target
company’s stock and:
A.the target’s book value before news of the acquisition got out.
B.the target’s book value after news of the acquisition got out.
C.the target’s market value before news of the acquisition got out.
D.the target’s market value after news of the acquisition got out.
Which of the following terms is not associated with mergers and acquisitions?
A.White knight
B.Tender offers
C.Greenmail
D.Stock dividend
There is neither a gain nor a loss on the sale of a depreciable asset for an amount
exactly equal to its:
A.acquisition cost.
B.tax book value.
C.opportunity cost.
D.historical cost.
Which of the following is true of top-down or bottom-up planning?
A.Bottom-up plans tend to overstate achievable performance.
B.Top-down plans are consolidated from lower management€s inputs.
C.Bottom-up plans do not include judgment by top-level executives.
D.Top-down plans are usually conservative.
Determine the beta of a portfolio consisting of the following common stocks.
A.1.00
B.1.12
C.1.09
D.1.11
A $1000 par value convertible bond has a conversion price of $25. It is currently selling
for $1,200, despite the fact that the bond€s coupon rate and the market interest rate are
equal. The common stock obtained upon conversion is selling for $27 per share. What
is the convertible bond€s conversion ratio?
A.37
B.40
C.48
D.200
____ markets deal in long-term securities having maturities greater than one year.
A.Credit
B.Money
C.Super
D.Capital
Which of the following bond ratings indicate junk bonds?
A.A/A
B.Baa/BBB
C.Ba/BB
D.B/B
E.Both c. and d.
The failure of a firm that adheres to a residual dividend policy to pay a dividend implies
that:
A.the dividend payout ratio has increased.
B.all of the firm’s earnings were spent on capital budgeting projects.
C.the dividend payout ratio has remained unchanged.
D.the growth prospects of the firm have slackened.