Total return for preferred stock consists of:
A.capital gains yield.
B.dividend yield.
C.dividend yield and the present dividend.
D.capital gains yield and dividend yield.
It is difficult to trade with a country that has a nonconvertible currency because:
A.it is impossible to either buy or sell its currency.
B.a foreign business operating in the country can’t convert profits earned there into its
own nation’s currency at a reasonable rate.
C.governments with nonconvertible currencies discourage international trade.
D.All of the above
The differences between stocks and bonds include which of the following?
A.Future cash flows from stocks are not guaranteed.
B.Bonds have a fixed maturity and a guaranteed repayment of principal.
C.The timing and amount of cash flows from a bond are fixed.
D.All of the above
E.None of the above
The objective in solving capital rationing problems is to:
A.accept all projects with a PI greater than 1.1.
B.maximize the average IRR of the projects that are accepted.
C.maximize the total NPV of the projects that are accepted.
D.minimize the firm’s cost of capital.
Because NPV is calculated using expected cash flows, NPV is ____.
A.generally a correct representation of the future for very risky projects
B.a random variable
C.not subject to the riskiness of the cash flows
D.not subject to the variance of the cash flows
A firm is planning for next year and has developed the following information
What receivables balance should the firm plan for next year if management intends to
reduce the ACP by five days? (Calculate using ending balances and a 360-day year):
A.$1.035M
B.$1.150M
C.$1.265M
D.None of the above
Amortization debt is defined as:
A.paid as a lump sum at the end of a loan.
B.repaid principal over the life of the loan.
C.the death of a loan.
D.repaid in a lump sum at the beginning of a loan.
Large corporations tend to be:
A.partnerships.
B.T-type corporations.
C.C-type corporations.
D.sole proprietorships.
Which of the following would decrease the sustainable growth rate if all other variables
are held constant?
A.Increase in dividend payout ratio
B.An increase in equity
C.An increase in net income
D.Both a & b
E.All of the above
The foreign exchange market is organized as ____.
A.an actual physical exchange like the NYSE
B.a central computerized exchange like the NASDAQ
C.a network of brokers and banks with a presence in most major financial centers
D.a computerized exchange with a physical location in Hong Kong
The financial plan is especially important in:
A.predicting cash and borrowing needs.
B.designing corporate strategies.
C.structuring relations with stockholders.
D.anticipating business downturns.
Wellington Gas has a target capital structure of 50% equity, 40% debt, and 10%
preferred stock. The cost of retained earnings is 16 percent, and the cost of new equity
(from selling stock) is 16.7 percent. Wellington can sell debentures at an after-tax cost
of 8.3%. Its cost of preferred stock is 11.9%. What is Wellington’s cost of capital before
and after the break point in the MCC?
A.12.51% and 12.86%
B.11.18% and 11.53%
C.14.23% and 14.68%
D.None of the above
The SML represents a:
A.condition of a volatile market.
B.stable market condition.
C.condition of stable equilibrium.
D.shift in market conditions.
A foreign currency quote of $1.00 : 0.85 British pounds is ____.
A.an indirect quote in Great Britain, but a direct quote in the U.S.
B.a direct quote in Great Britain, but an indirect quote in the U.S.
C.a direct quote in both great Britain and the U.S.
D.an indirect quote in both Great Britain and the U.S.
Which of the following can be used to make a comparison of projects with unequal
lives?
A.Replacement Chain Method
B.Equivalent Annual Annuity Approach
C.Profitability Index
D.Both a & b
E.All of the above