1) consider the following set of cashflows to be received over the next 3 years:
if the discount rate is 10%, how would we write the formula to find the future value of
this set of cash flows at year 3?
a.
b.$100 (1.10) + $225 (1.10) + $300 (1.10)
c.$100 (1.10)3 + $225 (1.10)2 + $300 (1.10)
d.$100 (1.10)2 + $225 (1.10) + $300
2) a reorganization of debts whereby the creditor committee decides that replacing the
operating management is the only feasible way to maintain the firm, is called
a.a composition
b.an extension
c.creditor control
d.none of the above
3) michelle is buying a house and the mortgage terms are 30 years, monthly payments.
if the interest rate is 5% (apr), what are the payments on a $150,000 loan?
a.$7500
b.$9757
c.$ 805
d.$5229
4) narrbegin: sea grove beach corp.
sea grove beach corporation
sea grove beach corporation is executing an initial public offering with the following
characteristics. the company will sell 12 million shares at an offer price of $20 per
share, the underwriter will charge a 7 percent underwriting fee, and the shares are
expected to sell for $27.50 per share by the end of the first days trading. assuming this
ipo is executed as expected.
narrend
what is the total cost (underwriting fee and underpricing) of this issue to sea grove
beach corporation?
a.$6.30 million
b.$16.80 million
c.$106.80 million
d.$125.00 million
5) accountants classify debt as long-term if
a.the debt is financing a long-term asset
b.the debt matures in more than one year
c.the debt matures in more than 6 months
d.it is interest bearing
6) you are asked by the chief financial officer of your firm to predict what the firms
stock price will be exactly 4 years from today. if your firm is expected to grow at 3%
indefinitely and the cost of capital is 10% while the expected annual dividend one year
from today is $10, then what should be the price of your firms stock 4 years from
today?
a.$142.86
b.$160.79
c.$112.55
d.none of the above
7) narrbegin: abc corp.
abc corporation
abc corporation just paid a dividend of $1.50 a share. the dividend is expected to grow
at 10% a year for the next 2 years, and the 5% per year thereafter. the required return to
invest in abc stock is 12.50%.
narrend
what is the expected dividend for abc in year 2?
a.$1.65
b.$1.73
c.$1.82
d.$1.91
8) you set up a college fund in which you pay $2,000 each year at the beginning of the
year. how much money will you have accumulated in the fund after 18 years, if your
fund earns 7% compounded annually?
a.$72,757.93
b.$67,998.07
c.$20,118.17
d.$28,339.25
9) a one-year treasury security currently returns a 4.50% yield to maturity. a two-year
treasury security offers a 4.80% yield to maturity. if the expectations hypothesis is true,
what is the expected return on a one-year security next year?
a.4.80%
b.4.90%
c.5.00%
d.5.10%
10) narrbegin: bavarian brewhouse
bavarian brewhouse
capital structure information for bavarian brewhouse
narrend
assuming no corporate taxes, what is bavarian brewhouses wacc?
a.16.23%
b.12.99%
c.13.44%
d.5.28%
11) an example of a share privatization issue would be
a.the public issue of securities representing ownership in the telephone system which is
currently owned by the government of a foreign country
b.the public issue of securities representing ownership in a firm that is currently
privately owned by a foreign citizen
c.the private issue of securities representing ownership in a firm that is currently
privately owned by a foreign citizen
d.none of the above
12) oak barrel company has net operating income of $10 million. further, the company
has $80 million of debt outstanding with a required rate of return of 7 percent; the
required rate of return on the industry is 12 percent; and the corporate tax rate is 35
percent. what is the gain from leverage if the personal tax rate on stock income is 15
percent and the personal tax rate on debt income is 30 percent?
a.$22.34 million
b.$19.41 million
c.$16.86 million
d.$12.19 million
13) sunk costs:
a.are irrelevant
b.should be considered when determining an investments relevant cash flows
c.are equal to the firms opportunity costs
d.all of the above