1) agreements giving the venture capitalists the right to participate in any sale of stock
that companys manager might arrange for themselves
a.repurchase rights
b.stock option plans
c.demand registration rights
d.participation rights
2) the short-term financing strategy where a company relies heavily on short term
borrowing to finance a portion of their long term growth is called a(n)
a.conservative strategy
b.aggressive strategy
c.matching strategy
d.growth strategy
3) the financing provided for equity investments in rapidly growing private companies
is called
a.venture capital
b.junk bonds
c.initial public offerings
d.none of the above
4) what is the term for the repackaging of loans and other traditional bank-based credit
products into securities that can be sold to public investors?
a.privatization
b.asset bundling
c.securitization
d.primary offering
5) which of the following statements is true?
a.more risk leads to higher option values
b.more risk leads to lower option values
c.options are characterized by equal payoffs
d.all of the above statements are true
e.none of the above statements is true
6) the annualized rate of interest on three-month government bonds is 7% in italy and
the annualized rate on three-month government bonds is 4% in the united states. the
current spot rate is $1.12/. using interest rate parity what is the implied three-month
forward rate between the u.s. dollar and the euro.
a.$1.112/
b.$1.128/
c.0.8865/$
d.$1.0886/
7) roxy international has earnings per share of $4.05; just paid dividend $2.03 and
expects a roi next year (and the foreseeable future) of 15% what is the dividend payout
ratio?
a.50.12%
b.15.00%
c.49.88%
d.35.12%
8) bavarian brewhouse is planning on going public. under the underwriting agreement
the underwriting discount is 7.25%. legal and other expenses amount to $1,350,000. if
the offering price of the stock is set at $12.50 per share, how many shares does the
company have to issue to raise $75 million?
a.6,108,000
b.6,585,445
c.6,696,429
d.7,124,359
9) the bankruptcy act of 2005
a.limits bonuses that can be paid to retain key employees
b.limits the length of time management is able to remain in control in chapter 11
c.increased the priority of administrative claims
d.all of the above
10) venture capitalists:
a.are banks that provide capital only for low-risk corporations
b.will only make investments if there is no risk involved
c.are professional investors who provide capital for high risk/high return
rapidly-growing entrepreneurial business
d.none of the above
11) narrbegin: kennesaw steel corp.
kennesaw steel corporation
as chief financial officer of the kennesaw steel corporation (ksc), you are considering a
recapitalization plan that would convert ksc from its current all-equity capital structure
to one including substantial financial leverage. ksc now has 100,000 shares of common
stock outstanding, which are selling for $50.00 each, and the recapitalization proposal is
to issue $2,000,000 worth of long-term debt at an interest rate of 8.0 percent and use the
proceeds to repurchase $2,000,000 of common stock.
narrend
refer to kennesaw steel corporation. the tax rate is 40%. what is the return on equity
under the new plan if ebit is $600,000 in the next year? (assume that the stock can be
repurchased at $50 per share)
a.7.4%
b.8.1%
c.8.8%
d.9.5%
12) currently the euro is trading at /$ 0.7206; if the current anticipated inflations are 4%
(u.s) and 2.3% (euro) over the next year what is the fair one-year forward price? (/$)
a.0.709
b.0.704
c.0.693
d.0.733