1) bavarian brewhouse is planning on going public. under the underwriting agreement
the underwriting discount is $1.30. legal and other expenses amount to $1,350,000. if
the offering price of the stock is set at $50 per share, how many shares does the
company have to issue to raise $75 million?
a.6,696,429
b.6,816,964
c.6,000,000
d.5,769,345
2) narrbegin: bavarian sausage
bavarian sausage
you bought a share of bavarian sausage stock for $46.50 at the beginning of the year.
during the year the stock paid a $2.75 dividend and at the end of the year it trades at
$52.75.
narrend
refer to bavarian sausage. what is the total return of your stock investment?
a.5.91%
b.13.44%
c.26.69%
d.19.35%
3) a two-year bond offers a yield of 6% and a three year bond offers a yield of 7.5%.
under the expectations theory what should be the yield on a one year bond in two years?
a.5.95%
b.10.56%
c.3.06%
d.12.49%
4) georgia food is exploring the possibility of bringing a new frozen pasta to the market.
which of the following items are not relevant for the projects analysis?
a.cost of increasing shelf space at grocery stores
b.lost revenue from its frozen pizza sales since some customers will switch to purchase
the new frozen pasta
c.cost of advertising the new product
d.market research funds the company has spent on testing the viability of the new
product
5) assuming a 28% lender’s affordability ratio, estimated monthly property taxes and
insurance of $250, a 25% down payment (of the purchase price), and an annual gross
income of $84,800, calculate the maximum purchase price based on monthly income.
the monthly payment will occur at the end of the month and you plan to pay off the
mortgage over a 30-year period at a 6.25% annual interest rate.
a.$374,343
b.$280,757
c.$282,219
d.$321,360
e.none of the above
6) a manager who wants to find out at which point a projects profits and costs are equal
will conduct a(n)
a.sensitivity analysis
b.scenario analysis
c.breakeven analysis
d.none of the above
7) narrbegin: bavarian brewhouse
bavarian brewhouse
capital structure information for bavarian brewhouse
narrend
what is bavarian brewhouses wacc if their marginal tax rate equals 34%
a.12.08%
b.12.99%
c.13.44%
d.5.28%
8) consider the following financial leverage information for abc corporation. the debt
pays 10% annually in interest and the tax rate is 40%. for what ebit will the eps be equal
for either capital structure?
a.$25,000
b.$50,000
c.$75,000
d.$90,000
9) polaroids bankruptcy filing is an example of a failure due to
a.business cycle downturn
b.corporate maturity
c.poor financial actions
d.illiquidity
10) narrbegin: needsalift aprs
needsalift, inc. aprs
needsalift, inc. has $10 million in funds to distribute to its unsecured creditors. two sets
of possible claims are presented below.
narrend
for case ii, what settlement will the unsecured bondholders receive?
a.$4 million
b.$3.25 million
c.$2.22 million
d.nothing
11) narrbegin: exhibit 7-3
exhibit 7-3
narrend
given exhibit 7-3, what is the expected return on the portfolio?
a.14.1%
b.15.0%
c.16.3%
d.17.9%
12) louis international has a lease with payments of $750,000 made at the beginning of
each year. if no purchase option exists, and the company is in the 40% tax bracket, what
is the annual after-tax cash outflow on the lease?
a.$ 60,000
b.$130,000
c.$ 70,000
d.$200,000
13) a wealthy individual who makes private equity investments on an ad hoc basis, is
called a(n)
a.angel capitalist
b.small business investment company
c.financial venture capital fund
d.venture capital limited partnership
14) the statistical term, variance is defined as
a.the expected value of deviations from the mean
b.the expected value of squared deviations from the mean
c.the sum of squared deviations from the mean
d.the sum of squared deviations from the mean divided by the number of observations
available
15) louis bonds have 14 years to maturity, with a coupon rate of 8%, paid annually; if
the appropriate discount rate is 12% what is the current value of louis bonds?
a.$1,000.00
b.$ 734.87
c.$ 340.46
d.$ 350.56