1) john smith seeks $15 million from a vc fund. john and the vc agree that the company
should be ready to go public in 8 years. at that time the company should have a net
income of $6.75 million. if comparable firms are expected to be trading at a p/e ratio of
25, what will be the companys market capitalization at the time of the ipo?
a.$375 million
b.$168.75 million
c.$126.35 million
d.$254.75 million
2) you have the choice between two investments that have the same maturity and the
same nominal return. investment a pays simple interest, investment b pays compounded
interest. which one should you pick?
a.a, because it has a higher effective annual return
b.a and b offer the same return, thus they are equally as good
c.b, because it has higher effective annual return
d.not enough information
3) bavarian sausages enterprise value is $75,000,000, the market value of its debt is
$23,000,000 and the company does not have any preferred stock outstanding. if the
company has 3,500,000 shares outstanding, what should be bavarian sausages stock
price?
a.$21.43
b.$14.86
c.$28.00
d.$6.57
4) as a young graduate, you have plans on buying your dream car in three years. you
believe the car will cost $50,000. you have two sources of money to reach your goal of
$50,000. first, you will save money for the next three years in a money market fund that
will return 8% annually. you plan on making $5,000 annual payments to this fund. you
will make yearly investments at the beginning of the year. the second source of money
will be a car loan that you will take out on the day you buy the car. you anticipate the
car dealer to offer you a 6% apr loan with monthly compounding for a term of 60
months. to buy your dream car, what monthly car payment will you anticipate?
a.$483.99
b.$540.15
c.$627.73
d.$652.83
5) narrbegin: wimmp venture capital
wimmp venture capital
where is my money professional venture capital (wimmp) made a $10 million
investment in bavarian sausage technology (bst) 5 years ago and in return received 2.5
million shares of convertible preferred stock that can be converted into 1.5 shares of
common stock. after all stock has been converted bst will have 22.5 million shares
outstanding. in addition, the company is planning on issuing an additional 5 million
shares in an ipo.
narrend
what fraction of bsts common stock will wimmp own after the ipo?
a.16.67%
b.11.11%
c.9.09%
d.13.64%
6) of the five basic corporate finance functions, which deals with developing
company-wide structures that force managers to act ethically and to make decisions that
further the interests of the firms stockholders?
a.financing
b.corporate governance
c.financial management
d.risk management
7) venture fund a focuses on start up technology companies while venture fund b
focuses on middle-stage technology companies. which firm would require the highest
returns on its investments?
a.venture fund a
b.venture fund b
c.venture funds require the same return
d.it is impossible to say which firm would require the highest return
8) narrbegin: total cash budget
bavarian brews schedule of projected cash disbursement
all of bavarian brews sales are credit sales. the company collects 60% of its sales in the
next month and the remainder in the month after that.
the companys purchases are 75% of its sales. of those purchases 15% are paid in cash,
50% are paid in the following month and the remainder in the month after that. the
companys wages and salaries equal 15% of sales each month plus $50. taxes of $125
are due in april. the company is going to purchase new machinery worth $1000 in
march and pay 50% right away and the rest in april. in addition, the company will pay a
$175 dividend in february.
narrend
what is bavarian brews expected net cash flow in march?
a.-$402.25
b.$402.25
c.$726
d.-$1,128.25
9) narrbegin: sawtooth eoq
sawtooth industries
sawtooth industries uses an economic order quantity (eoq) model to manage its
inventory investment. the company uses about 25,000 molded plastic assemblies each
year. order costs for these are $150 per order, while carrying costs are about $250 per
unit per year. assume a 365 day year.
narrend
what is sawtooth industries economic order quantity (eoq) for these parts?
a.122 units
b.289 units
c.224 units
d.173 units
10) most money market mutual funds set their net asset value at a fixed ____ per share.
a.$1
b.$10
c.$100
d.$1,000
11) you are considering buying carpet for your university; grade a carpet costs $17.10 a
square yard and lasts 5 years and grade b costs $12.50 a square yard and lasts 3 years;
grade c costs $8 a yard and lasts 2 years; which carpet should be chosen if the discount
rate is 10%? assume that due to a large endowment given by the state’s”carpet king” the
university is committed to continued carpet use. which carpet should be chosen?
a.grade a
b.grade b
c.grade c
12) which of the following is the most popular exit strategy that vcs use?
a.ipo
b.through sale of the portfolio company directly to another company
c.by selling the portfolio company back to the entrepreneur
d.none of the above
13) narrbegin: stock returns
narrend
what is the average return of stock c?
a.13.8%
b.12.6%
c.5.00%
d.8.52%
14) narrbegin: hillary
hillary investments
between 1999 and 2003, hillary investments has produced returns as follows:
narrend
calculate the expected return for hillary investments.
a..003
b..004
c..005
d..006