1) a zero coupon bond has a yield to maturity of 5%; what is the bonds taxable capital
gain in last year of the bonds existence?
a.$ 47.61
b.$ 1,000.00
c.$ 0.00
d.$ 45.26
2) roxy botanicals forecasts the following cash flows at the end of each year for a
project. if the firm’s discount rate is 9%, compounded continously, what is the present
value of the project?
a.$8,592,925
b.$8,702,132
c.$8,736,914
d.$8,845,121
3) narrbegin: makestuff company
makestuff company
the makestuff companys earnings stream is highly dependent on the cost of a key
commodity input. management believes taxable earnings will be $100,000 if the input
price is low, taxable earnings will be $50,000 if the input price is at a moderate level,
but earnings will be zero if the input price is high. management sees these outcomes as
being equally likely. the company pays a 15% tax rate on the first $50,000 of taxable
earnings, and a 25% rate on all earnings above $50,000.
narrend
what is makestuffs after-tax earnings if it can lock in the moderate price level for sure?
a.$50,000
b.$42,500
c.$80,000
d.$40,333
4) you are offered a zero-coupon bond with a $1,000 face value and 5 years left to
maturity. if the required return on the bond is 8%, what is the most you should pay for
this bond?
a.$752.69
b.$680.58
c.$1,000
d.$1,126.94
5) which of the following is a weakness of a sole proprietorship?
a.unlimited life
b.easy to form
c.limited liability
d.limited access to capital
6) american depository receipts provide u.s. investors with
a.the ability to purchase foreign securities in the foreign companys domestic currency
b.the ability to purchase foreign securities in u.s. dollars
c.the ability to purchase u.s. securities in foreign currency denominations
d.none of the above
7) smith enterprises stock currently sells for $17.50. a call option on the stock has a
strike price of $20 and currently sells at $4.50. what is the time value of the option?
a.$0
b.$2.50
c.$2
d.$4.50
8) louis international recently conducted an ipo, louis received $22 per share and the
offer price was $25 per share and the stock price rose to $35 per share. what was the
one day return?
a.45.45%
b.40.00%
c.52.00%
d.37.14%
9) what is the present value of an operating lease that involves payments of $5,000 per
year (the end of the year) for 10 years with no possibility of purchase at the end of the
lease term. assume that the firm is in the 40% marginal tax rate and the pre-tax cost of
debt for the firm is 8%?
a.$38,986.43
b.$23,391.86
c.$20,130.24
d.$18,000.00
10) which of the following assets would probably not lend itself to a futures contract?
a.paper
b.water
c.real estate
d.microchips
11) the procedures for reorganizing a failed or failing corporation reside
a.in chapter 7 of the bankruptcy reform act of 1978
b.in chapter 11 of the bankruptcy reform act of 1978
c.common law
d.none of the above
12) if a firm is wanting to repurchase some of its shares from the market and wants to
pay a uniform price for all of the shares, then what method would it most likely use?
a.open-market share repurchase
b.tender offer
c.executive option repurchase
d.none of the above
13) unsecured bonds that have legal claims inferior to other outstanding bonds are
a.debentures
b.mortgage bonds
c.subordinated debentures
d.discount bonds