1) you are trying to determine the appropriate risk-adjusted rate, in venus sun-dollars
for a project on venus. you know that the correct risk-adjusted discount rate in u.s.
dollars is 15% and the risk-free rate in dollars is 8%. if the risk-free rate in sun-dollars
is 5%, then what is the correct risk-adjusted discount rate in dollars? round to the
nearest .01%
a.11.81%
b.6.48%
c.1.39%
d.none of the above
2) a target integration in which the acquirer can absorb the targets resources directly
with no remaining trace of the target as a separate entity.
a.subsidiary merger
b.statutory merger
c.subsidiary merger
d.reverse triangle merger
e.consolidation
3) which of the following qualifies as a foreign bond?
a.a swiss franc-denominated bond issued in switzerland by a u.s. corporation
b.a dollar-denominated bond issued by a u.s. corporation and sold to non-u.s. investors
c.a euro-denominated bond issued by a german corporation and sold to u.s. investors
who live in germany
d.a euro-denominated bond issued by a german corporation and sold to european
investors
4) if you need $35,000 for a down payment on a house in six years, how much money
must you invest today at 7% interest compounded annually to achieve your goal?
a.$14,700.00
b.$20,300.00
c.$23,321.98
d.$24,954.52
5) in which form of business organization is a agency problem most likely to occur?
a.sole proprietorship
b.corporation
c.partnership
d.limited liability company
6) the over-the-counter market for trading equity securities is located
a.in new york city
b.in chicago
c.in boston
d.none of the above
7) $100 million dollar days of float could be arrived at by
a.$100 million dollars worth of checks with an average of 5 days of float
b.$20 million dollars worth of checks with an average of 5 days of float
c.$10 million dollars worth of checks with an average of 20 days of float
d.$10 million dollars worth of checks with an average of 5 days of float
8) the value of a project at a given future point in time is known as:
a.the terminal value
b.net working capital
c.opportunity cost
d.sunk cost
9) you need to decide whether your firm should transfer funds from a deposit account to
a transfer account via edt that will cost $2 or via a wire transfer that will cost $20. it is a
friday so the wire transfer will save you 3 days of float. if your cost of capital is 8%,
then how large must the transfer be in order to be indifferent between the wire and the
adt? round to the nearest dollar.
a.$82,125
b.$30,417
c.$27,375
d.$3,042
10) the going rate for paying a ceo in the widget industry is $1,000,000 per year. you
find that the ceo of masterwidgets has a contract that pays him $1,200,000 per year for
five years if he cannot work for any other firm (for any reason during the contractual
period). what is the value of a real option for a ceo to not work for a firm other than
masterwidgets? assume a discount rate of 10%.
a.$181,818
b.$200,000
c.$758,157
d.$1,000,000
11) you need to purchase coal 4-months from now and would like to hedge against price
movement. the spot price for coal is $50 a railroad car and the risk-free rate is 8%. what
is the 4-month forward price for a railroad car of coal?
a.$48.73
b.$50.00
c.$51.30
d.$54.00
12) calculate the annual payment for a 20-year mortgage on a $3.5 million building at a
7.5% interest rate. assume that the entire building is financed and that payments are
made at the end of each year, starting at the end of the first year and ending at the end of
the 20th year.
a.$175,000.00
b.$343,322.67
c.$186,293.52
d.$340,815.32