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Corporate governance has become increasingly important over the years. The Sarbanes-Oxley (SOX) Act

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Question;1. Corporate;governance has become increasingly important over the years. The Sarbanes-Oxley (SOX) Act was enacted to;improve transparency in financial accounting and to prevent fraud. Which of the following is correct.;A. fraud has;not occurred since enactment of SOX;B. SOX has;not increased auditing costs;C. government;agencies are not required to comply with SOX;D. SOX;requires companies to have a strong board of directors;E. None of;the above;2. Both;Adams and Wolfe are large public corporations with subsidiaries throughout the;world. Adams uses a centralized approach and makes most of the decisions for its;subsidiaries. Wolfe uses a decentralized;approach and its subsidiaries make most of their own decisions. Which of the following is correct?;A. the;agency problem would probably be more pronounced for Wolfe because of a higher;probability that subsidiary decisions would conflict with the parent;B. agency;costs would be the same for both companies;C. a;decentralized approach is almost always better;D. a;centralized approach is almost always better;E. none of;the above;3. With;convertible bonds;A. the;company receives additional cash money when the convertibles are converted.;B. Investors;are willing to accept a lower interest rate on a convertible than on otherwise;similar straight debt;C. Investors;require a higher interest rate than on otherwise similar straight debt;D. the;convertibles cannot be converted for at least 10 years;E. none of;the above;4. Convertible;bonds are;considered equity on the balance sheet;similar in risk to the company's common stock;riskier than the company's common stock;less risky than the company's common stock;none of the above;5. KORO;Corporation's common stock currently sells for $27.50. Its 8%;convertible bonds (issued at par $1000) now sell for $950. The bonds can be converted into 40 shares of;common stock. What is the conversion;price?;$25;$40;$23.50;$38;none of the above;6. KORO;Corporation's common stock currently sells;for $27.50. Its 8% convertible bonds (issued at par $1000);now sell for $950. The bonds can be;converted into 40 shares of common stock.;What is the conversion value of the bond?;$688;$593.75;$950;$1,100;none of the above;7. Which of;the following is correct?;Warrants are similar to long-term put options;The company receives additional funds when warrants are;exercised;The company receives additional funds when bonds are converted;Warrants can sometimes be detached and traded separately;from the debt with which they were issued, but this is unusual.;none of the above;Number 8;A company will issue 20-year bonds with annual interest;payments. Each bond will include 20;warrants that give the holder to purchase one share of stock per warrant. Each warrant is expected to have a value of;$5.75. A similar straight-debt issue;would require an 8% coupon. What coupon;rate should be set on the bonds with warrants so that the package will sell for;$1,000?;5.76%;6.83%;7.94%;6.98%;none of the above

 

Paper#47573 | Written in 18-Jul-2015

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