1) a bond issued by an international borrower and sold to investors in countries with
currencies other than the currency in which the bond is denominated is called
a.a eurobond
b.an alien bond
c.a cross-currency bond
d.none of the above
2) one method of preventing or reducing the chance that corporate management will
harm the bondholders to the benefit of the stockholders is to:
a.require that key executives own a certain percentage of the firm’s outstanding stock
b.require that key executives own a certain percentage of the firm’s outstanding bonds
c.write detailed covenants into bond contracts
d.all of the above are acceptable methods
3) narrbegin: smith int’l investment
smith enterprises international investment
smith enterprises is considering opening a new manufacturing plant in france. the cost
of the new plant will be 25 million and the plant is expected to generate after tax cash
flows of 10 million at the end of each year for the next 4 years. after that the plant will
be worthless. the current /$ exchange rate is 0.8166/$. the expected rate of inflation for
the u.s is 2.5% per year. the risk free rate in the u.s. is 4% and the risk free rate in france
is 6%.
narrend
refer to smith enterprises international investment. if the required return of the project is
15% in euro terms, what should be the required return in dollar terms?
a.15.00%
b.12.83%
c.17.21%
d.9.65%
4) 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 yield of louis bonds?
a. 8.33%
b. 9.00%
c. 10.84%
d. 12.00%
5) which of the following statements is true?
a.the acp is prone to sending misleading signals when daily sales fluctuate
b.the acp is also known as the days’ sales outstanding
c.the acp represents how long a firm’s inventory remains in its warehouse
d.all of the above
e.(a) and (b) only
6) antitakeover measures in a corporate charter are called
a.shark repellents
b.bear hugs
c.poison pills
d.white knights
7) the sarbanes-oxley act of 2002
a.established the securities and exchange commission
b.requires ceo and cfos of all large companies to personally certify their firms financial
statements
c.defined ethical behavior
d.established that a cfo must be a member of the firms audit committee of the board of
directors
8) narrbegin: igbb
its gonna be big (igbb)
its gonna be big (igbb) is seeking venture capital investment of $8 million. the founder
and the venture capital fund agree the firm is worth $15 million today, and the venture
capital investor asserts it requires a 35% (compounded annually) expected return. igbb
and the venture capital investor foresee an ipo in four years, at which time igbb is
expected to be valued at $90 million.
narrend
if the venture capital investor pushes for a 40% per year expected return, what share of
igbbs equity will it receive in exchange for its $8 million investment?
a.34%
b.39%
c.30%
d.26%
9) mark duncan owns a furniture manufacturing firm in the united states. he is
considering an investment in japan which will have the following cash flows: initial
cost = ¥-300,000,000, year 1 = ¥150,000,000, year 2 = ¥200,000,000, year 3 =
¥250,000,000 and year 4 = ¥100,000,000. the appropriate discount rate that should be
used to discount yen-denominated cash flows is 11%. calculate the npv of the project, if
duncan plans on converting the npv from yen into u.s. dollars at the current spot rate of
¥123/$.
a.¥246,130,565
b.$246,130,565
c.$2,001,062
d.¥2,001,062
10) roxy corporation finances its operations with $20 million in stock and $30 million
in bonds. if the firm issues $5 million in additional bonds and uses the proceeds to retire
$5 million worth of equity. what will be the firms new debt to equity ratio? (assume
zero taxes and perfect capital markets)
a.0.75
b.2.33
c.0.86
d.1.75
11) narrbegin: exhibit 22-1 liquidation
exhibit 23-1
narrend
if the company has $2,534,000 in funds to distribute to unsecured creditors, what
percentage of their claims are going to be satisfied if case i occurs?
a.26.32%
b.40.38%
c.100%
d.59.62%
12) what is the term that represents the abbreviation used to identify a company when
its stock price is being quoted?
a.cusip
b.ticker tape
c.ticker symbol
d.none of the above
13) which of the following describes the collective action problem?
a.when a ceo fails to represent the interest of shareholders in daily decisions of the firm
b.when the shareholders of a firm fail to act in their own best interests
c.when the managers of a firm lack incentive to maximize shareholder wealth
d.when an individual stockholder spends time and resources monitoring managers,
bearing the cost, while the benefits go to all the shareholders in the firm
14) integrated accounts payable:
a.provide early notification of checks that will be presented against a company’s
account on a given day
b.help combat a common type of check fraud
c.provide a company with outsourcing of its accounts payable or disbursement
operations
d.eliminate nonearning cash balances in corporate checking accounts
15) you notice that the price of a 4.0% coupon, 12-year treasury note is priced at 90:16
in the wall street journal. what is the bonds yield to maturity?
a.2.56%
b.2.565%
c.5.07%
d.5.13%
16) bavarian sausage just issued a 10-year 12% coupon bond. the face value of the bond
is $1,000 and the bond makes semiannual coupon payments. if the required return on
the bond is 10%, what is the bonds price?
a.$1,122.89
b.$815.26
c.$1,000.00
d.$1,124.62
17) if viewing a stock quote from the wall street journal, the columns labeled hi and lo
refer to
a.the highest and lowest prices at which the stock was sold in the last fifty-two weeks
b.the highest and lowest prices at which the stock was sold in the last six months
c.the highest and lowest prices at which the stock was sold in the last month
d.the highest and lowest prices at which the stock was purchased in the last month