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UOP FIN370 Final exam




Question;1) The goal;of the firm should be;A. maximization;of profits;B. maximization;of shareholder wealth;C. maximization;of consumer satisfaction;D. maximization;of sales;2) An;example of a primary market transaction is;A. a;new issue of common stock by AT&T;B. a;sale of some outstanding common stock of AT&T;C. AT&T;repurchasing its own stock from a stockholder;D. one;stockholder selling shares of common stock to another individual;3) According;to the agency problem, _________ represent the principals of a corporation.;A. shareholders;B. managers;C. employees;D. suppliers;4) Which of;the following is a principle of basic financial management?;A. Risk/return;tradeoff;B. Derivatives;C. Stock;warrants;D. Profit;is king;5) Another;name for the acid test ratio is the;A. current;ratio;B. quick;ratio;C. inventory;turnover ratio;D. average;collection period;6) The;accounting rate of return on stockholders? investments is measured by;A. return;on assets;B. return;on equity;C. operating;income return on investment;D. realized;rate of inflation;7) If you;are an investor, which of the following would you prefer?;A. Earnings;on funds invested compound annually;B. Earnings;on funds invested compound daily;C. Earnings;on funds invested would compound monthly;D. Earnings;on funds invested would compound quarterly;8) The;primary purpose of a cash budget is to;A. determine;the level of investment in current and fixed assets;B. determine;accounts payable;C. provide;a detailed plan of future cash flows;D. determine;the estimated income tax for the year;9) Which of;the following is a non-cash expense?;A. Depreciation;expenses;B. Interest;expense;C. Packaging;costs;D. Administrative;salaries;10) The;break-even model enables the manager of a firm to;A. calculate;the minimum price of common stock for certain situations;B. set;appropriate equilibrium thresholds;C. determine;the quantity of output that must be sold to cover all operating costs;D. determine;the optimal amount of debt financing to use;11) A;zero-coupon bond;A. pays;no interest;B. pays;interest at a rate less than the market rate;C. is;a junk bond;D. is;sold at a deep discount at less than the par value;12) If you;have $20,000 in an account earning 8% annually, what constant amount could;you withdraw each year and have nothing remaining at the end of 5 years?;A. $3,525.62;B. $5,008.76;C. $3,408.88;D. $2,465.78;13) At what;rate must $400 be compounded annually for it to grow to $716.40 in 10 years?;A. 6%;B. 5%;C. 7%;D. 8%;14) The;present value of a single future sum;A. increases;as the number of discount periods increase;B. is;generally larger than the future sum;C. depends;upon the number of discount periods;D. increases;as the discount rate increases;15) Which of;the following is considered to be a spontaneous source of financing?;A. Operating;leases;B. Accounts;receivable;C. Inventory;D. Accounts;payable;16) Compute;the payback period for a project with the following cash flows, if the;company?s discount rate is 12%.;Initial outlay = $450;Cash flows;Year 1 = $325;Year 2 = $65;Year 3 = $100;A. 3.43;years;B. 3.17;years;C. 2.88;years;D. 2.6;years;17) For the;NPV criteria, a project is acceptable if the NPV is __________, while for the;profitability index, a project is acceptable if the profitability index is;A. less;than zero, greater than the required return;B. greater;than zero, greater than one;C. greater;than one, greater than zero;D. greater;than zero, less than one;18) Which of;the following is considered to be a deficiency of the IRR?;A. It;fails to properly rank capital projects.;B. It;could produce more than one rate of return.;C. It;fails to utilize the time value of money.;D. It;is not useful in accounting for risk in capital budgeting.;19) The firm;should accept independent projects if;A. the;payback is less than the IRR;B. the;profitability index is greater than 1.0;C. the;IRR is positive;D. the;NPV is greater than the discounted payback;20) The most;expensive source of capital is;A. preferred;stock;B. new;common stock;C. debt;D. retained;earnings;21) The cost;associated with each additional dollar of financing for investment projects;is;A. the;incremental return;B. the;marginal cost of capital;C. risk-free;rate;D. beta;22) The XYZ;Company is planning a $50 million expansion. The expansion is to be financed;by selling $20 million in new debt and $30 million in new common stock. The;before-tax required rate of return on debt is 9%, and the required rate of;return on equity is 14%. If the company is in the 40% tax bracket, what is;the marginal cost of capital?;A. 14.0%;B. 9.0%;C. 10.6%;D. 11.5%;23) Shawhan;Supply plans to maintain its optimal capital structure of 30% debt, 20%;preferred stock, and 50% common stock far into the future. The required return;on each component is: debt?10%, preferred stock?11%, and common stock?18%.;Assuming a 40% marginal tax rate, what after-tax rate of return must Shawhan;Supply earn on its investments if the value of the firm is to remain;unchanged?;A. 18.0%;B. 13.0%;C. 10.0%;D. 14.2%;24) Lever;Brothers has a debt ratio (debt to assets) of 40%. Management is wondering if;its current capital structure is too conservative. Lever Brothers? present;EBIT is $3 million, and profits available to common shareholders are;$1,560,000, with 342,857 shares of common stock outstanding. If the firm were;to instead have a debt ratio of 60%, additional interest expense would cause;profits available to stockholders to decline to $1,440,000, but only 228,571;common shares would be outstanding. What is the difference in EPS at a debt;ratio of 60% versus 40%?;A. $1.75;B. $2.00;C. $3.25;D. $4.50;25) Zybeck;Corp. projects operating income of $4 million next year. The firm?s income;tax rate is 40%. Zybeck presently has 750,000 shares of common stock which;have a market value of $10 per share, no preferred stock, and no debt. The;firm is considering two alternatives to finance a new product: (a) the;issuance of $6 million of 10% bonds, or (b) the issuance of 60,000 new shares;of common stock. If Zybeck issues common stock this year, what will be the;projected EPS next year?;A. $4.94;B. $2.96;C. $5.33;D. $3.20;26);risk is generally considered only a paper gain or loss.;A. Transaction;B. Translation;C. Economic;D. Financial;27) Capital;markets in foreign countries;A. offer;lower returns than those obtainable in the domestic capital markets;B. provide;international diversification;C. in;general are becoming less integrated due to the widespread availability of;interest rate and currency swaps;D. have;been getting smaller in the past decade;28) Buying;and selling in more than one market to make a riskless profit is called;A. profit;maximization;B. arbitrage;C. international;trading;D. an;efficient market;29) What;keeps foreign exchange quotes in two different countries in line with each;other?;A. Cross;rates;B. Forward;rates;C. Arbitrage;D. Spot;rates;30) One reason;for international investment is to reduce;A. portfolio;risk;B. price-earnings;(P/E) ratios;C. advantages;in a foreign country;D. exchange;rate risk


Paper#50935 | Written in 18-Jul-2015

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