1) if the canadian dollar is worth $1.50, and the swiss franc is worth $1.30, then how
many canadian dollars does it take to purchase a swiss franc?
a.1.1538
b.0.8667
c.1.5000
d.none of the above
2) gizmo co. has a z-score based on its most recent financial information of 2.3. based
on this,
a.gizmo has a high probability of failure
b.gizmo has a low probability of failure
c.gizmos probability of failure is uncertain
d.none of these, since the z-score does not predict firm failure
3) digit! corporation has the following financial characteristics: its profit margin is 10%,
its total asset turnover is 1.75, its asset to equity ratio is 1.5 and its sustainable growth
rate is 20.6%. what dividend payout ratio is consistent with these values?
a.45%
b.55%
c.65%
d.35%
4) assuming that current currencies are currently in equilibrium and the exchange rate
for the costa rican colon is crc/$ = 511.53 and that the u.s. expects inflation over the
next year to be 4% while in costa rican there is an expectation of 7.8%; what must the
exchange rate be in one year? (crc/$)
a.531.991
b.551.429
c.474.518
d.530.221
5) what is the term that describes an agreement of the creditors by which they pass the
power to liquidate the firm’s assets to an adjustment bureau, a trade association, or a
third party?
a.trustee
b.assignment
c.absolute priority
d.extension
e.composition
6) alpha car rental purchased 5 cars for a total of $100,000 three years ago. now it is
replacing the cars with newer vehicles. the company has depreciated 92.59% of the old
cars, and sold these cars for a total of $ 25,000. assume a tax rate of 40%. what is the
cash inflow from the sale of these vehicles?
a.$25,000
b.$15,000
c.$17,964
d.$16,500
7) what should be the objective of a focus on stakeholders?
a.maximize the stakeholders interests
b.in situations of conflict pick stakeholders interests over shareholders interests
c.preserve stakeholders interests
d.disregard shareholders interests all together
8) conflicts of interest exist in the investment banking industry. in 2002 ten of the top
u.s. investment banking firms agreed to pay a total of $1.4 billion in fines and they are
also required to
a.use the dutch auction process for any new ipos
b.use the english auction process for any new ipos
c.purchase independent research from third parties
d.all of the above
9) the first public sale of company stock to outside investors is called a/an
a.seasoned equity offering
b.shareholders meeting
c.initial public offering
d.proxy fight
10) louis is evaluating a treasury bill. it is a $1 million face value with a discount of
3.25% and maturing in 182 days. what is the purchase price?
a.$1,000,000.00
b.$967,138.89
c.$983,569.44
d.$1,032,500.00
11) which statement is false concerning the time value of money?
a.the greater the compound frequency, the greater the ear
b.the ear is always greater than the apr
c.an account that pays simple interest will have a lower fv than an account that pays
compound interest
d.the stated interest rate is also referred to as the apr
12) you sell 20 corn futures contracts when the futures price is $3.67 per bushel (each
contract is for 5,000 bushels). if you eventually settle the contract at $3.78, what is your
payoff?
a.$11,000
b.-$11,000
c.$13,000
d.-$13,000
13) 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
assuming no taxes, what is never-crash airlines wacc?
a.7%
b.19.22%
c.24.45%
d.17.12%
14) why is the cancellation option a key aspect of staged financing?
a.it allows the entrepreneur the opportunity to exit the contract
b.it allows the venture capital fund to extract excessive returns
c.it allows the venture capital fund to invest at lower expected returns because risks are
reduced
d.it provides either party a no fault exit from the investment contract