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1) today, the price of an october oil futures contract closed at $49.50 per barrel.
yesterday, the contract closed at $50. when margin accounts are marked to market,
a.long positions will have $0.75 per barrel added
b.long positions will have $0.75 per barrel deducted
c.short positions will have $0.75 per barrel deducted
d.no changes are made until the october expiration
2) the npv method is most likely to be used in:
a.large firms
b.publicly traded firms
c.firms run by cfos with mbas
d.all of the above
3) portfolio weights must sum to ____.
a.1
b.0.99
c.0
d.portfolio weights do not need to sum to a particular value
4) which of the following information cannot be found in a bonds indenture?
a.the coupon rate
b.the maturity of the bond
c.the price of the bond
d.none of the above
5) the inflation rate in london is expected to be 10% over the next year and the inflation
rate in canada is expected to 6%. using purchasing power parity you could say that
a.the £ will appreciate relative to the canadian dollar
b.the canadian dollar will appreciate relative to the £
c.the risk-free rate of interest in london will rise to compensate for the higher inflation
rate
d.the risk-free rate of interest in london will fall to compensate for the higher inflation
rate
6) if an auto maker were to fail in an economic downturn then it would fail due to
a.economic activity
b.corporate maturity
c.an overly conservative capital structure
d.none of the above
7) which of the following statements is a detailed invoice listing all checks cleared,
account charges, lockbox charges, electronic transactions, etc.?
a.bank statement
b.bank account analysis statement
c.reconciliation statement
d.financial statement
e.none of the above
8) the primary purpose of the accounts payable function
a.is to examine all incoming invoices and determine the proper amount to be paid
b.is to generate float for the firm
c.is to pay invoices as soon as possible
d.none of the above
9) which of the following is (are) not value-enhancing motives for mergers and
acquisitions?
a.external expansion
b.economies of scale and/or scope
c.diversification
d.managerial synergies
10) subsidiaries or stand-alone firms established by non-financial corporations to gain
access to emerging technologies
a.institutional venture capital funds
b.corporate venture capital funds
c.small business investment companies
d.financial capital funds
11) considering the following information what is the value of the put?
a.$0.00
b.$2.75
c.$1.43
d.$6.28
12) narrbegin: abc logistics
abc logistics
the managers of abc logistics (abc) have decided to expand the companys operations
into a few new markets. to fund this opportunity, abc has decided to launch a seasoned
equity offering to raise new equity capital. abc currently has 12 million shares
outstanding, and yesterdays closing market price was $40.00 per abc share. the
company plans to sell 3 million newly issued shares in its seasoned offering. the
investment banking firm of armstrong incorporated has agreed to underwrite the new
stock issue for a 4 percent discount from the offering price, which abc and armstrong
have agreed should be $0.50 per share lower than abcs closing price the day before the
offering is sold.
narrend
if abcs stock price closes at $39.00 the day before the offering, calculate the total cost of
the seasoned equity offering to abcs existing stockholders as a percentage of the
offering proceeds.
a.16.23%
b.18.51%
c.20.10%
d.20.40%
13) narrbegin: bavarian credit terms
bavarian brew credit terms
bavarian brew is producing and selling brewery equipment to microbreweries
nationwide. bavarian is charging $15,000 per unit and all of their sales are on credit.
under the current credit policy bavarian brew expects to sell 500 units. the variable
costs are $6,000/unit and fixed costs are $1,500,000 per year. the company is thinking
about changing their credit terms from net 30 to 3/10 net 30. the effect of this change
would be a 5% increase in unit sales, but also an increase in bad debt expenses from 2%
to 4% of sales. the company expects 75% of its customers to take advantage of the cash
discount. currently the company has an average collection period of 38 days, 30 days
until the customers mail their payments and another 8 days to process the payments
once they arrive. bavarian brews opportunity cost of funds invested in accounts
receivable is 12%.
narrend
what is bavarian brews marginal profit from increased sales?
a.$500,000
b.$225,000
c.$305,000
d.$425,000
14) 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
what is bavarian sausages breakeven point in the most likely scenario?
a.572
b.1,125
c.5,000
d.2,526
15) the greater the uncertainty about an assets future benefits,
a.the lower the discount rate investors will apply when discounting those benefits to the
present
b.the higher the discount rate investors will apply when discounting those benefits to
the present
c.the greater is the present value of those benefits
d.none of the above
16) mendez implements records the following cash flows at the beginning of each year
for a project. if the firm's discount rate is 11%, what is the value of the project at the
end of the last year?
a.$4,293,253
b.$2,547,837
c.$4,657,524
d.$4,765,511
17) a put option with a $50 strike price on bavarian sausage stock will expire in one
year. if you know that the risk free rate is 4%, that the stock currently sells at $47 and
the call on the same stock has a value of $2.75, what is the price of the put?
a.$4.67
b.$2.75
c.$3.83
d.$1.56
