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1) bavarian sausage just issued a 10-year 12% coupon bond. the face value of the bond
is $1,000 and the bond makes annual coupon payments. if the bond is trading at
$967.25, what is the bonds yield to maturity?
a.12.00%
b.12.59%
c.11.26%
d.13.27%
2) narrbegin: exhibit 7-5
exhibit 7-5
narrend
given exhibit 7-5, what is the weight of security 3?
a.42.9%
b.33.3%
c.23.8%
d.cannot be determined with the data given
3) narrbegin: never-crash airlines
never-crash airline
never-crash airline has a capital structure that consists of 30% debt and 70% equity. the
companys cost of debt is 7%. the company has a beta of 1.9. the risk free rate equals
4.5% and the expected return on the market portfolio is 15%.
narrend
what is the never-crash airlines after tax cost of debt?
a.7.00%
b.4.62%
c.2.38%
d.4.50%
4) an increase in inventory will ____ net working capital.
a.increase
b.decrease
c.have no affect on
d.cannot be determined
5) during most years, which source has generally provided more total investment in
entrepreneurial companies?
a.institutional venture capital funds
b.angel funds
c.a and b have provided approximately equal total investment
d.none of the above
6) john smith seeks $15 million from a vc fund. john and the vc agree that the company
should be ready to go public in 8 years. at that time the company should have a market
capitalization of $368.75 million. if the vc requires a 45% return on their investment,
what is the vcs stake at the time of the ipo?
a.$368.75 million
b.$293.11 million
c.$202.65 million
d.$15 million
7) which of the following factors might be most important for an entrepreneur that is
considering an ipo in an industry where a firms strategy is its most important asset
a.the use of stock as a compensation vehicle
b.the investment banking fee
c.the disclosure requirements of publicly traded firms
d.all of the above are most import to such a firm
8) gizmo co. has a z-score based on its most recent financial information of 1.2. based
on this,
a.gizmo has a high probability of failure
b.gizmo has a low probability of failure
c.gizmos probability of failure is uncertain
d.none of these, since the z-score does not predict firm failure
9) a particular asset has a beta of 1.2 and an expected return of 10%. the expected return
on the market portfolio is 13% and the risk-free is 5%. the stock is
a.overpriced
b.underpriced
c.appropriately priced
d.cannot tell from the given information
10) which form of business organization allows shareholders to be taxed as partners
while still retaining their limited liability status?
a.corporation
b.partnership
c.s corporation
d.sole proprietorship
11) what recent act has attempted to reduce the possibility of more accounting scandals
in our economy?
a.tax relief act of 2003
b.internal accounting standards act of 2002
c.mccain-feingold act of 2003
d.sarbanes-oxley act of 2002
12) when one currency buys less of another currency in the forward market than it does
in the spot market, we say that it is trading at
a.a forward discount
b.a forward premium
c.a spot discount
d.a spot premium
