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Fin 571/Fin 571 Final Exam UOP 100% Correct




Question;1) Which of the following statements is true?;A. A security is a claim issued by a firm that pays owners;interest, not dividends;B. A call option analyzes conflicts of interest and behavior in;a principal-agent relationship;C. An agent-manager can never make bad decisions;D. The difference between the value of one action and the value;of the best alternative is called an opportunity cost;2) Book value, or net book value, refers to;A. the statement of a firm's financial position at one point in;time, including its assets and the claims on those assets by creditors and;owners;B. 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;C. an agent-manager never making bad decisions;D. the net of assets less liabilities shown in the accounting;statements;3) 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 current yield was less than 9% when the bond was first;issued;B. The current yield was greater than 9% when the bond was first;issued;C. The market value of the bond is more than $1,000;D. The market value of the bond is less than $1,000;4) If the yield to maturity for a bond is less than the bond?-s;coupon rate, the market value of the bond is;A. greater than the par value;B. less than the par value;C. equal to the par value;D. cannot tell;5) For investors, the proper measure of a stock?-s risk is its;A. nondiversifiable risk;B. specific risk;C. nonsystematic risk;D. standard deviation;6) A company's beta is -1.5. If the overall stock market;decreases by 5%, what is the expected change in the firm?-s stock price?;A. Share price decreases by 5%;B. Share price decreases by 6.5%;C. Share price increases by 7.5%;D. Share price decreases by 7.5%;7) Which of these investments would you expect to have the;highest rate of return for the next 20 years?;A. U.S. Treasury bills;B. Long-term corporate bonds;C. Intermediate-term U.S. government bonds;D. Money market funds;8) Dimensions of risk include;A. uncertainty about the future outcome;B. the certainty of a negative outcome;C. the impossibility of the same return;D. uncertainty about yesterday's outcome;9) One problem with using negative values for the proportion;invested in the riskless asset to represent a borrowed amount is that the;implied borrowing rate of interest is the same as the __________.;A. prime rate of interest;B. current rate of interest;C. lending rate of interest;D. nominal rate of interest;10) If you were willing to bet that the overall stock market was;heading up on a sustained basis, it would be logical to invest in;A. high beta stocks;B. low beta stocks;C. stocks with large amounts of unique risk;D. stocks that plot below the security market line;11) Stony Products has an inventory conversion period (ICP) of;about 70 days. The receivables collection period (RCP) is 30 days. The payables;deferral period (PDP) is about 40 days. What is Stony?-s cash conversion cycle;(CCC)?;A. 100 days;B. 60 days;C. 140 days;D. 70 days;12) The main source of short-term operating capital is;A. trade credit;B. bank loans;C. Bonds;D. sale of treasury stock;13) An investor's risky portfolio is made up of individual;stocks. Which of the following statements about this portfolio is true?;A. Each stock in the portfolio has its own beta;B. Selling any stock in this portfolio will lower the beta of;the portfolio;C. An investor cannot change the risk of this portfolio by her;choice about personal leverage;D. Each stock in the portfolio will have a beta greater than 1;14) An all-equity-financed firm would __________.;A. not pay any income taxes, because interest would exactly;offset its taxable income;B. pay corporate income taxes, because it would have interest;expense;C. not pay corporate income taxes, because it would have no;interest expense;D. pay corporate income taxes if its taxable income is positive;15) If a firm wants to lower its weighted average cost of;capital (WACC), one way to do so would be to;A. sell more common shares;B. sell more bonds;C. pay a cash dividend;D. issue a stock dividend;16) Boeing? is a world leader in commercial aircraft. In the;face of competition, Boeing? often faces a critical __________ decision;whether to develop a new generation of passenger aircraft;A. present value;B. payback;C. capital budgeting;D. dividend;17) Ideas for capital budgeting projects come from all levels;within an organization. The bottom-up process results in ideas moving;through the organization;A. downward;B. upward;C. sideways;D. any way;18) Which of the following statements is true?;A. A mutually exclusive project can be chosen independently of;other projects;B. When undertaking one project prevents investing in another;project, and vice versa, the projects have a positive payback;C. A conventional project has an initial cash outflow followed;by one or more expected future cash inflows;D. Whenever projects are independent and conventional, the;internal rate of return (IRR) and net present value (NPV) methods will disagree;19) In practice, the __________ rule is the preferred criteria;to accept or reject a capital investment project;A. NPV;B.profitability;index;C. IRR;D. Payback;20) The Jerome Inc. western regional branch has been looking to;install a new distribution center. The analysts have run the numbers on the;distribution center costs and annual inflow from the investment. The project;will cost $5 million at the beginning of the first year. The project will;generate $1 million in earnings before interest and taxes at the end of each;year. Jerome is in the 35% tax bracket and annual depreciation equates to;$500,000 per year. The distribution center's end of the fifth year's salvage;equals its book value, or $2,500,000. Compute the project's NPV, assuming;Jerome?-s WACC equals 12%.;A. -$1,238,328;B. $564,060;C. $1,825,731;D. -$66,776;21) The __________ method breaks down when evaluating projects;in which the sign of the cash flow changes;A. IRR;B. NVP;C. PI;D. Payback;22) Studies show systematic differences in capital structures;across industries. These are due primarily to differences in;A. a firm's inventory turnover ratio;B. the ability of assets to support borrowing;C. accounting practices;D. management's attitude toward what other industries are doing;23) Capital structure decisions refer to the;A. dividend yield of the firm's stock;B. blend of equity and debt used by the firm;C. capital gains available on the firm's stock;D. maturity date for the firm's securities;24) Which of the following statements concerning preferred stock;is true?;A. Preferred stockholders have a prior claim on the income and;assets of the firm, as compared to the claims of lenders;B. Preferred stock dividends per share are normally increased as;the earnings of the firm increase;C. Preferred dividends per share are usually not cut or;suspended unless the firm is faced with serious financial problems;D. Preferred stockholders are the ultimate owners of the firm;25) Mortgage bonds are __________A. secured by a lien on the;issuer's general assets;B. secured by the lien on the issuer's specific, real assets;C. usually secured by assets such as common shares of one of the;issuer's subsidiaries;D. a form of unsecured debt;26) __________ says to calculate the net advantage of leasing;based on the incremental after-tax benefits that leasing will provide;A. The capital market efficiency;B. The options principle;C. The principle of comparative advantage;D. The principle of incremental benefits;27) From the lessee's viewpoint, the relevant discount rate for;evaluating a lease versus buy decision is the;A. cost of issuing new common stock;B. pretax cost of issuing debt;C. after-tax cost of issuing debt;D. lessor's cost of debt;28) 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 expects;that expansion will allow them to sell an additional 4.5 million loaves in the;next 5 years. What additional revenues minus expenses will be generated from;expansion?;A. $912,500;B. $1,000,500;C. $1,012,500;D. $1,102,500;29) 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. Few firms will engage in capital rationing;30) In efficient markets, as in the United States, market prices;are not expected to be;A. wrong;B. fair;C. followed by many analysts;D. incorporate all information


Paper#47448 | Written in 18-Jul-2015

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