Archives: Quiz

1) virtually all finance jobs require: a.teamwork b.good communication skills c.proficiency with computers d.all of the above e.both (a) and (c) 2) you are evaluating a perpetuity. the first payment is $100, and it arrives in one year. each subsequent […]

1) consider the following set of cashflows to be received over the next 3 years: if the discount rate is 10%, how would we write the formula to find the future value of this set of cash flows at year […]

1) ____ represents the amount of cash that would remain if a firm’s assets were sold and all liabilities were paid. a.book value b.market value c.liquidation value d.present value e.none of the above 2) if a 9%, $100,000 loan has […]

1) narrbegin: silly sally silly sally, inc. silly sally, inc. forecasts the following sales levels: january, $420; february, $435; march, $450; and april, $470. historically, 40% of its sales are for cash. of the remaining sales, 80% are collected in […]

1) emma international is considering easing credit standards to increase sales, and potentially profits. currently the firm sells 500,000 units at a sales price of $22 per unit and variable cost of $13 per unit. currently the average collection period […]

1) omega corp has an roe of 15%; has just paid a dividend of $1.55; a pays 0% of its earnings out in dividends, and the appropriate discount rate is 20%; what is the current stock price? a.$ 7.75 b.$ […]

1) the quote for a euro in terms of u.s. dollars is $1.1232/. how many euros equals one u.s. dollar($)? a.1 equals $1 since there exchange rates are fixed to one another b.0.8903 is equal to $1 c.1.1232 is equal […]

1) if a company issues $25,000 worth of debt and has a corporate tax rate of 40%, what is the pv of the debt tax shield? a.$25,000 b.$10,000 c.$15,000 d.$20,000 2) narrbegin: bavarian sausage scenario bavarian sausage scenario bavarian sausage […]

1) when a subsidiary of the bidder merges with the target firm a.subsidiary merger b.statutory merger c.subsidiary merger d.reverse triangle merger e.consolidation 2) shares of beech brewery, inc. trade at $35. call options with a strike price of $30 trade […]

1) bavarian sausage just paid a $1.57 dividend. if the required return on the stock investment is 14%, and the stock currently sells for $34.37, what is the implied dividend growth rate for this company? a.9.02% b.6.39% c.12.68% d.9.43% 2) […]

1) which of the following is a valid concern for an investor who is considering purchasing a bond which has been issued under rule 144a? a.rule 144a issues are less liquid than public issues b.rule 144a issues are traded in […]

1) which of the following securities poses the greatest financial risk for the investor? a.common equity b.preferred equity c.debt d.convertible debt 2) you purchase a call option and a put option on the shares of a company. the sticker price […]

1) an investor put 40% of her money in stock a and 60% in stock b. stock a has a beta of 1.2 and stock b has a beta of 1.6. if the risk-free rate is 5% and the expected […]

1) you checked the /$ exchange rate today and you found that one dollar cost you 0.8214. when you checked the one year /$ forward exchange rate one dollar was trading at 0.8026. what is the forward premium (discount) for […]

1) bankruptcy filings in the united states: a.are mostly personal bankruptcies b.are mostly business bankruptcies c.are evenly divided between personal and business bankruptcies d.none of the above 2) which of the following firms is most likely to pay out a […]

1) suppose that over the last 30 years, company abc has averaged a return of 10%. over the same period, the treasury bond rate has averaged 3%. the current estimate of the treasury bond rate is 5%. using the historical […]

1) the right but not the obligation to produce oil from one of your existing oil wells can be described as a.a real option b.a stock option c.an interest rate option d.a future 2) a bond is priced such that […]

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. […]

1) if the canadian dollar is worth $1.50, and the swiss franc is worth $1.30, then how many swiss francs does it take to purchase a canadian dollar? a.1.1538 b.0.8667 c.1.300 d.none of the above 2) which of the following […]

1) 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 bond is trading at $867.25, what is the bonds yield to maturity? a.12.00% […]

1) the issue of corporate capital structure has similarities to college students’ financial situations because: a.many students use borrowed funds to finance their education b.most finance students will ultimately work for a major corporation and will make decisions as to […]

1) you are introduced to an investment that has an expected return of 20% equal to the standard deviation of the distribution of returns. what is the probability that the investment will have a return less than 20% in the […]

1) the suggestion that poorly monitored managers will pursue mergers to maximize their corporations asset size because managerial compensation is usually based on firm size is called a.the managerialism theory of managers b.the concept of unintended consequences c.the untrustable manager […]

1) near-cash assets in the form of short-term investments are often called a.marketable securities b.corporate bonds c.treasury notes d.treasury bonds 2) you are considering the purchase of a business that produces net cash flows of $350,000 per year in perpetuity. […]

1) you will receive a stream of $50 payments beginning at the end of year 1 until the final payment at the end of year 5. what amount will you have at the end of year 5 if you can […]

1) if the canadian dollar is worth $1.50, and the swiss franc is worth $1.30, then how many canadian dollars does it take to purchase a swiss franc? a.1.1538 b.0.8667 c.1.5000 d.none of the above 2) gizmo co. has a […]

1) narrbegin: exhibit 22-1 liquidation exhibit 23-1 narrend if the company has $2,456,000 in funds to distribute to unsecured creditors, what is the settlement that is received by the holders of the notes payable in case i? a.$1,444,706 b.$2,500,000 c.$1,055,294 […]

1) the minimum dollar amount required by an investor when taking a position in a futures contract is called the a.initial margin b.maintenance margin c.margin account d.none of the above 2) a firm is considering investing $10 million today to […]

1) a standard fixed for floating interest rate swap contract is effectively a.a series of call options on the interest rate b.a series of put options on the interest rate c.a series of forward rate agreements d.none of the above […]

1) markus needman, inc. just paid a 30% stock dividend to its shareholders. if the price of the companies shares was $100 before the dividend, what should the price of the shares be now? if helpful, assume that the company […]

1) flaws of the accounting rate of return method include: a.the choice of accounting g hurdle return rate is essentially arbitrary b.depreciation method has a large impact on the accounting rate of return c.this method makes no adjustment for project […]

1) elroy investors is interested in purchasing the bonds of the judy company. judys bonds are currently priced at $1,100.00 and have 14 years to maturity. if the bonds have a 6% coupon rate what is the yield-to-maturity of these […]

1) what is the present value of an operating lease that involves payments of $8,000 per year (at the end of each year) for 12 years with no possibility of purchase at the end of the lease term. assume that […]

1) one of the main reasons for the name derivatives is that a.the value of the underlying instrument derives its value from the derivative instrument b.the instruments derive their value from the value of other instruments c.calculus is required to […]

1) a disadvantage of the probabilistic approach to estimating an assets returns is: a.history always repeats itself b.it does not require one to assume that the future will look like the past c.recent history is more important than future risk […]

1) an investor who employs a short straddle strategy is hoping that the underlying stock price a.is extremely volatile b.is stable c.trends above the strike price of the options d.trends below the strike price of the options 2) molotov cranberry […]

1) if a firm increases its use of financial leverage, then what would we generally expect for the effect of that increased leverage to have on an eps that is already very low? a.eps would be lower with financial leverage […]

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 […]

1) narrbegin: needsalift, inc. needsalift, inc. you are analyzing the potential acquisition of nothing better! ice creams, inc. by your firm, needsalift, inc. the ice cream firm is a wholly owned subsidiary of grand lake investments, which has set a […]

1) choc-lattes corp. earned $5.00 per share in 2006, and paid a dividend of $2.00 per share. if it earns $5.50 in 2007 and follows a constant nominal payout policy, its dividend will be a.$3.30 b.$3.00 c.$2.20 d.$2.00 2) the […]

1) louis international is considering easing credit standards to increase sales, and potentially profits. currently the firm sells 200,000 units at a sales price of $125 per unit and variable cost of $103 per unit. currently the average collection period […]

1) a share of preferred stock pays a $2 annual dividend, but pays the dividend in four equal quarterly installments. investors seek a 12% annual percentage return on the investment. what price should the preferred stock trade? a.$4.17 b.$6.67 c.$8.50 […]

1) for a stock pricing model, an analyst selects 10% as the sustainable growth rate in dividends for a firm. given that the firm pays out 40% of net income as dividends each year, what is the return on shareholder […]

1) an unsecured bond that only creditworthy firms can issue is called a a.mortgage bond b.collateral trust bond c.debentures d.junk bond 2) a firm has a capital structure containing 40 percent debt, 10 percent preferred stock, and 50 percent common […]

1) if a bond has a sinking fund provision then the actual maturity of the bond will probably be a.greater than the stated maturity on the bond b.exactly equal to the state maturity on the bond c.less than the stated […]

1) for accounts receivable, with respect to cost trade-offs the costs that must be evaluated are: a.the cost of investment in accounts receivable and bad debts and the opportunity cost of lost sales due to overly restrictive credit policy and/or […]

1) private debt can take the form of a.a private debt agreement arranged between corporate borrowers and financial institutions b.an unregistered security offering sold directly to accredited investors c.both a and b d.none of the above 2) narrbegin: bavarian brew […]

1) suppose you have a chance to buy a treasury strip. the strip is from a government bond with a 6% coupon rate (face value of $1,000). you will receive this strip in one year and have a discount rate […]

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 […]

1) a firm has outstanding debt of $100 million. suppose it voluntarily agrees to pay all creditors 40 cents on the dollar. this is a.an extension b.a composition c.a combination of the two in (a) and (b) d.a cram-down 2) […]