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UNIVERSITY OF PHOENIX FIN 571 FINAL EXAM

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Question;1) Occurs when a;follower" receives the benefit of an expenditure made by a;leader" by imitating the leader's behavior.;A. free-rider problem;B. The Principle of Comparative Advantage;C. asymmetric information;D. put option;2) Occurs when inaccurate;information can falsely exist.;A. moral hazard;B. The Principle of Valuable Ideas;C. free-rider problem;D. adverse selection;3) Refers to situations wherein the;agent can take unseen actions for personal benefit even though such actions are;costly to the principal.;A. adverse selection;B. moral hazard;C. zero-sum game;D. The Behavioral Principle;4) The annual report refers to;A. a report issued annually by managers to primarily convey information about;select working capital ratios.;B. the length of time remaining until an asset's maturity.;C. a report issued annually by a firm that includes, at a minimum, an income;statement, a balance sheet, a statement of cash flows, and accompanying notes.;D. the extent to which something can be sold for cash quickly and easily;without loss of value.;5) Remaining maturity refers to;A. the length of an asset's life when it is issued.;B. a technical accounting term that encompasses the conventions, rules, and;procedures necessary to define accepted accounting practice at a particular;time.;C. a report issued annually by a firm that includes, at a minimum, an income;statement, a balance sheet, a statement of cash flows, and accompanying notes.;D. the amount of time remaining until its maturity.;6) Generally accepted accounting principles (GAAP) refers to;A. the length of an asset's life when it is issued.;B. a technical accounting term that encompasses the conventions, rules, and;procedures necessary to define accepted accounting practice at a particular time.;C. a report issued annually by a firm that includes, at a minimum, an income;statement, a balance sheet, a statement of cash flows, and accompanying notes.;D. the extent to which something can be sold for cash quickly and easily;without loss of value.;7) Original maturity refers to;A. the length of an asset's life when it is issued.;B. a technical accounting term that encompasses the conventions, rules, and;procedures necessary to define accepted accounting practice at a particular;time.;C. the price for which something could be bought or sold in a reasonable length;of time, where ?reasonable length of time? is defined in terms of the item's;liquidity.;D. the net amount (net book value) for something shown in quarterly accounting;statements.;8) The firm's assets in the balance sheet refer to;A. the extent to which something can be sold for cash quickly and easily;without loss of value.;B. the statement of a firm's financial position at one point in time, including;its assets and the claims on those assets by creditors (liabilities) and owners;(stockholders' equity).;C. the productive resources in the firm's operations;9) Book value (or Net book value) refers to;A. the length of an asset's life when it is issued.;B. the statement of a firm's financial position at one point in time, including;its assets and the claims on those assets by creditors (liabilities) and owners;(stockholders' equity).;C. the price for which something could be bought or sold in a reasonable length;of time, where ?reasonable length of time? is defined in terms of the item's;liquidity.;D. the net amount shown in the accounting statements.;10) The return expected by equity investors is called the __________.;A. market capitalization rate.;B. dividend yield.;C. average cost of capital.;D. none of these;11) Assume that the par value of a bond is $1,000. Consider a bond where the;coupon rate is 9% and the current yield is 10%. Which of the following;statements is true?;A. The market value of the bond is more than $1,000;B. The current yield was a lot less than 9% when the bond was first issued;C. The current yield was a lot greater than 9% when the bond was first issued;D. The market value of the bond is less than $1,000;12) Preferred stock payment obligations are typically __________.;A. viewed like debt obligations.;B. issued with a maturity date.;C. valued as an annuity.;D. none of these;13) Certain countries have restrictions. In practice, U.S. investors have NOT;invested very much internationally. Possible factors include __________.;A. lower transaction costs.;B. less political risk.;C. costs of converting currencies.;D. all of these;14) Certain countries have restrictions. In practice, U.S. investors have NOT;invested very much internationally. Possible factors include __________.;A. non-listing of foreign securities on U.S. stock exchanges.;B. foreign tax considerations.;C. efficiency in converting currencies.;D. all of these;15) For diversified investors, the proper measure of a stock's risk is;A. its nonsystematic risk.;B. its nondiversifiable risk.;C. its specific risk.;D. its standard deviation.;16) One problem with using negative values for w1 (the proportion invested in;the riskless asset) to represent a borrowed amount is that the implied;borrowing rate of interest is the same as __________.;A. the lending rate of interest;B. the prime rate of interest;C. the current rate of interest;D. the nominal rate of interest;17) Which of these investments would you expect to have the highest rate of;return for the next 20 years?;A. intermediate-term U.S. government bonds;B. U.S. Treasury bills;C. long-term corporate bonds;D. anybody?s guess;18) According to the Principle of;Risk-Return Trade-Off, investors require a higher return to compensate for;A. less risk;B. lack of diversification;C. diversification;D. greater risk;19) Suppose the Ruskin Oil;Corporation has $150,000 for both its book balance and its bank balance. It;takes 4 days for a check to clear. If Ruskin writes a $3,000 check, which of;the following statements is false?;A. Ruskin?s available balance is $150,000, its book balance is $147,000, and;its disbursement float is $3,000.;B. If Ruskin writes a $3,000 check that takes 4 days to clear, during this;period, $3,000 of disbursement float has been created.;C. Ruskin?s book balance declines by the amount of the check, from $150,000 to;$147,000, but the bank balance is unchanged until the check clears.;D. After the check clears, the book and bank balances will both be $147,000 and;there is no more disbursement float.;20) Stony Products has a payables;turnover of six times. What is Stony's payables deferral period (PDP)?;A. about 30.42 days;B. about 56.50 days;C. about 60.83 days;D. none of these;21) Stony Products has a;receivables turnover of ten times. What is Stony?s receivables collection;period (RCP)?;A. about 35.42 days;B. about 36.50 days;C. about 40.83 days;D. none of these;22) __________ says to calculate the incremental after-tax cash flows connected;with working capital decisions.;A. The Principle of Time Value of Money;B. The Signaling Principle;C. The Principle of Incremental Benefits;D. The Options Principle;23) __________ says to compare the;benefits and costs of alternative uses and sources of money using after-tax;APYs.;A. The Principle of Incremental Benefits;B. The Principle of Time Value of Money;C. The Signaling Principle;D. The Options Principle;24) Bank term loans represent;A. long-term loans that looks like short-term debt;B. loans for specified amounts that require borrowers to repay them according;to specified schedules;C. the pledge of receivables;D. all of these;25) Which (if any) of the below;statements is false?;A. Higher collection costs reduce the NPV and but cannot cause it to be;negative.;B. A customer who is likely to make late payments is also more likely to;default and to require extra collection efforts.;C. Credit bureau reports give information about any legal judgments against the;firm.;D. none of these;26) Credit-policy decisions involve;all aspects of receivables management. The decision does NOT include which of;the following?;A. monitoring receivables and avoiding actions for slow payment;B. setting evaluation methods and credit standards;C. the choice of credit terms;D. controlling and administering the firm?s credit functions;27) Most credit sales are made on;an open account basis, which means __________.;A. that customers cannot simply purchase what they want.;B. that customers simply purchase what they want.;C. that suppliers dictate the terms of the purchase.;D. that suppliers cannot dictate the terms of the purchase.;28) An all-equity-financed firm;would __________.;A. not pay corporate income taxes because it would have no interest expense.;B. not pay any income taxes because interest would exactly offset its taxable;income.;C. pay corporate income taxes because it would have interest expense.;D. pay corporate income taxes if its taxable income is positive.;29) A profitable firm would;A. pay corporate income taxes because it would have interest expense.;B. pay corporate income taxes because it would not have interest expense.;C. pay corporate income taxes if it had a positive taxable income.;D. none of these;30) Whenever a firm splits itself;into separate units, with each unit having limited liability with respect to;its financing, the capital structure of each unit becomes __________.;A. an irrelevant consideration for a cost of capital.;B. the relevant consideration for a cost of capital.;C. important only if the firm faces financial distress.;D. none of these;31) There are two important tax;considerations for a capital budgeting project. These include which (if any) of;the following?;A. It is indeed cash flow that?s irrelevant.;B. The standard cash flow estimation does not explicitly identify the financing;costs.;C. The Principle of Incremental Benefits reminds us that it is the incremental;cash flow that?s relevant.;D. none of these;32) Projects can be classified into;various categories. These include;A. maintenance expenditures projects that involve replacing worn-out or damaged;equipment.;B. cost savings and revenue enhancement projects that include improvements in;production technology to realize cost savings and marketing campaigns to;achieve revenue enhancement.;C. capacity expansion projects that involve expanding the current business by;adding new equipment and facilities.;D. all of these;33) Ideas for capital budgeting;projects come from all levels within an organization. The bottom up process;results in ideas percolating through the organization.;A. sideways;B. downward;C. upward;D. any way;34) In practice, the;rule is preferred.;A. IRR;B. NPV;C. PI;D. Payback;35) Whenever projects are both;independent and conventional, then the IRR and NPV methods agree. Which of the;following statements is true?;A. A mutually exclusive project is one that can be chosen independently of;other projects.;B. When undertaking one project prevents investing in another project, and vice;versa, the projects are said to have a positive payback.;C. A conventional project is a project with an initial cash outflow that is;followed by one or more expected future cash inflows.;D. all of these;36) The __________ method breaks;down when evaluating projects in which the sign of the cash flow changes.;A. IRR;B. NPV;C. PI;D. Payback;37) Studies show systematic;differences in capital structures across industries. These are due mostly to;differences in __________.;A. hiring and firing practices.;B. the availability of tax shelter provided by things other than debt, such as;accelerated depreciation, investment tax credit, and operating tax loss;carryforwards.;C. what the arbitrage pricing theory tells us.;D. none of these;38) A firm cannot simply adopt the;industry average debt ratio, because differences exist among firms in any;particular industry with respect to __________.;A. tax position.;B. size.;C. competitive position.;D. all of these;39) Studies show systematic;differences in capital structures across industries. These are due mostly to;differences in __________.;A. the ability of assets to support borrowing.;B. the firm?s inventory turnover ratio.;C. accounting practices.;D. management?s attitude toward what other industries are doing.;40) Which of the following favors a;high dividend payout policy?;A. no legal restrictions;B. policy restrictions affecting trust and endowment funds;C. higher taxes;D. all of these;41) There can be a variety of;motives for stock repurchases including __________.;A. a decrease in anticipated earnings.;B. a buyback of undervalued stock.;C. a decrease in leverage.;D. all of these;42) Some countries have;in which shareholders' returns are not fully taxed twice.;A. an imputation tax system;B. a split tax system;C. a two-tier tax system;D. none of these;43) Conditional sales contracts;A. are seldom issued to finance the purchase of aircraft;B. are similar to equipment trust certificates;C. enable the borrower to obtain title to the assets only before it fully;repays the debt;D. all of these;44) The Time Value of Money;Principle says __________.;A. to set a price and other terms that investors will find acceptable when;issuing securities;B. to use discounted cash flow analysis to compare the costs and benefits of;financing decisions, such as alternative securities to sell, lease versus;borrow and buy, and bond refunding;C. to look for the most advantageous ways to finance the firm, such as the;lowest-cost debt alternative;D. that announcing the firm's decision to issue securities conveys information;about the firm;45) Stated maturity is __________.;A. usually a fixed rate, but it can be a variable rate that?s adjusted;according to a specified formula;B. the amount the borrower must repay;C. the date the borrower must repay the money it borrowed;46) The Time Value of Money;Principle says to __________.;A. recognize that the cancellation option in a lease is valuable to the lessee.;B. use discounted cash flow analysis to compare the costs and benefits of;leasing, relative to the alternative of borrowing and buying.;C. look for profitable opportunities to lease (or rent) an asset, rather than;borrow and buy it.;D. look for profitable opportunities to arrange project financing or limit;partnership financing for an asset you wish to purchase.;47) __________ says to calculate;the net advantage of leasing based on the incremental after-tax benefits that;leasing will provide.;A. The Principle of Comparative Advantage;B. The Principle of Incremental Benefits;C. The Options Principle;D. The Capital Market Efficiency;48) __________ says to look for;opportunities to develop asset-based financing arrangements that offer new;positive-NPV financing mechanisms.;A. The Principle of Self-Interested Behavior;B. The Principle of Comparative Advantage;C. The Principle of Valuable Ideas;D. The Time Value of Money Principle;49) The wholesale price for Captain;John?s is $1.00 per loaf, and the variable cost of production is $0.50 per;loaf. Captain John?s is expecting that expansion will allow them to sell an additional;5.0 million loaves in the next year. What additional revenues minus expenses;will be generated from expansion?;A. $25,000;B. $250,000;C. $550,000;D. none of these;[Contribution margin = wholesale;price? variable cost = $1.00? $0.50 = $0.50 per loaf. The additional 5;million loaves would therefore generate an increase of $0.50 per loaf times 5;million loaves = $2,500,000 in revenues minus expenses each year.];50) The wholesale price for Captain John?s is $3.00 per loaf. One million;loaves will be sold in the next year. What is the contribution margin?;A. $3,000,000;B. cannot tell;C. $3,000,000 minus fixed costs;D. $3.00;51) The wholesale price for Captain John?s is $0.612 per loaf, and the variable;cost of production is $0.387 per loaf. Captain John?s is expecting that;expansion will allow them to sell an additional 4.5 million loaves in the next;five years. What additional revenues minus expenses will be generated from;expansion?;A. $1,012,500;B. $1,102,000;C. $1,000,500;D. $912,500;52) In efficient markets, as in the;United States, you should think long and hard before you conclude that a market;price is __________.;A. wrong.;B. fair.;C. followed by many analysts.;D. all of these;53) Due to asymmetric information;the market fears that a firm issuing securities will do so when the stock is;A. caught up in a bear market.;B. being sold by insiders.;C. overvalued.;D. undervalued.;54) Which of the following;statements is true?;A. Soft capital rationing refers to the rationing imposed externally by limited;funds for borrowing from outside sources.;B. Hard capital rationing refers to the rationing imposed internally by the;firm.;C. A post audit is a set of procedures for evaluating a capital budgeting;decision after the fact.;D. all of these;55) __________ says to forecast the;firm?s cash flows, and analyze the incremental cash flows of alternative;decisions.;A. The Principle of Incremental Benefits;B. The Principle of Risk-Return Trade-Off;C. The Time Value of Money Principle;D. The Signaling Principle;56) __________ says to carefully;evaluate and monitor the financial plan?s impact on the firm and its;stakeholders.;A. The Principle of Capital Market Efficiency;B. The Principle of Self-Interested Behavior;C. The Principle of Diversification;D. The Principle of Risk-Return Trade-Off;57) __________ says to use common;industry practices as a good starting place for the planning process.;A. The Principle of Self-Interested Behavior;B. The Principle of Valuable Ideas;C. The Behavioral Principle;D. The Principle of Incremental Benefits

 

Paper#47432 | Written in 18-Jul-2015

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