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1) one benefit of external expansion is:
a.acquirers are able to purchase the firm at a substantial discount from market value
b.it slows down the expansion compared to a greenfield entry and allows the firm more
time to evaluate the potential of the expansion
c.that it may help reduce potential problems associated with greenfield entry
d.all of the above are benefits of external expansion
e.only (a) and (c) are benefits of external expansion
2) you checked the /$ exchange rate today and you found that one dollar cost you
0.8214. when you checked the three months (90 day) /$ forward exchange rate one
dollar was trading at 0.8026. what is the annualized forward premium (discount) for the
euro?
a.9.4%
b.-9.4%
c.2.35%
d.-2.35%
3) funds that have been sent by the payer but are not yet usable funds to the payee are
a.float
b.overdrawn funds
c.still available for the use of the payer
d.none of the above
4) the risk-free rate is 5% and the expected return on the market portfolio is 13%. a
stock has a beta of 1.0, what is its expected return?
a.8%
b.13%
c.5%
d.none of the above
5) a stainless steel products manufacturer with an 8.5% cost of capital receives a
$3,000,000 order, payable at the end of three years. what is the annual payment amount
made at the end of each year with the equivalent present value?
a.$660,864
b.$919,618
c.$949,473
d.$997,785
6) a growing firm seeks $30 million to develop and market its promising new
technology. an institutional venture capital fund steps in with an $8 million initial
investment. this is an example of
a.low base financing
b.staged financing
c.scaled financing
d.intermittent financing
7) a firm that is subject to chapter 7 of the bankruptcy reform act is one that
a.is in involuntary reorganization
b.is facing a cram-down procedure
c.is to be liquidated
d.is seeking a recapitalization
8) consider the adjusted closing prices for louis stock
what is the standard deviation of return of returns for louis stock?
a.0.041
b.0.054
c.0.233
d.0.202
9) narrbegin: npv profile
npv profile
the figure below shows the npv profile for two investment projects.
narrend
refer to npv profile. if the hurdle rate is 19%, and the two projects are independent,
which project should be accepted?
a.project 1
b.project 2
c.both projects
d.neither project
10) shareholders can attempt to overcome agency problems by all but one of the
following:
a.incurring costs to monitor managers
b.paying managers a good salary
c.relying on market forces to exert managerial discipline
d.paying the manager a proportion of the profits that the firm generates
11) narrbegin: exhibit 9-1
exhibit 9-1
a project requires an initial investment in equipment and machinery of $10 million. the
equipment is expected to have a 5-year lifetime with no salvage value and will be
depreciated on a straight-line basis. the project is expected to generate revenues of $5.1
million each year for the 5 years and have operating expenses (not including
depreciation) amounting to 1/3 of revenues.
narrend
refer to exhibit 9-1. assume the tax rate is 40%, and the cost of capital is 10%. what is
the net present value of the project?
a.$2.89m
b.$0.77m
c.-$6.82m
d.-$2.27m
12) the inventory control system technique that segregates inventory into three groups
is called the
a.economic order quantity model
b.abc system
c.material requirements planning system
d.just-in-time system
13) narrbegin: bavarian sausage scenario
bavarian sausage scenario
bavarian sausage is considering starting the production of a new chocolate filled
sausage. the company is not sure yet what the exact sales potential and costs of the
product will be. bavarian sausage has determined the following three possible
scenarios:
narrend
by how much would bavarian sausages breakeven point change in the most likely
scenario if the price/unit turns out to be only $6?
a.decrease by 375
b.remain unchanged
c.increase by 375
d.decrease by 228
14) roxy international recently conducted an ipo, roxy received $32 per share and the
offer price was $34 per share and the stock price rose to $35 per share. what was the
one day return?
a.3.13%
b.8.57%
c.2.94%
d.8.82%
