fin man final exam

Which one of the following will increase the cost of equity, all else held constant? Increase in the dividend growth rate Decrease in beta Decrease in future dividends Increase in stock price Decrease in market risk premium

Increase in the dividend growth rate

Which one of the following will affect the capital structure weights used to compute a firm's weighted average cost of capital? Decrease in the book value of a firm's equity Decrease in a firm's tax rate Increase in the market value of the firm's common stock Increase in the market risk premium Increase in the firm's beta

Increase in the market value of the firm's common stock

Kurt, who is a divisional manager, continually brags that his division's required return for its projects is one percent lower than the return required for any other division of the firm. Which one of the following most likely contributes the most to the lower rate requirement for Kurt's division? Kurt tends to overestimate the projected cash inflows on his projects. Kurt tends to underestimate the variable costs of his projects. Kurt has the most efficiently managed division. Kurt's division is less risky than the other divisions. Kurt's projects are generally financed with debt while the other divisions' projects are financed with equity.

Kurt's division is less risky than the other divisions.

Which one of the following is the tax rate that applies to the next dollar of taxable income that a firm earns? Average tax rate Variable tax rate Marginal tax rate Absolute tax rate Contingent tax rate

Marginal tax rate

Which one of the following methods of analysis is most appropriate to use when two investments are mutually exclusive? Internal rate of return Profitability index Net present value Modified internal rate of return Average accounting return

Net present value

The equity multiplier is equal to: one plus the debt-equity ratio. one plus the total asset turnover. total debt divided by total equity. total equity divided by total assets. one divided by the total asset turnove

one plus the debt-equity ratio.

Today, Courtney wants to invest less than $5,000 with the goal of receiving $5,000 back some time in the future. Which one of the following statements is correct? The period of time she has to wait until she reaches her goal is unaffected by the compounding of interest. The lower the rate of interest she earns, the shorter the time she will have to wait to reach her goal. She will have to wait longer if she earns 6 percent compound interest instead of 6 percent simple interest. The length of time she has to wait to reach her goal is directly related to the interest rate she earns. the period of time she has to wait decreases as the amount she invests today increases.

the period of time she has to wait decreases as the amount she invests today increases.

You are planning an extended trip to Hong Kong. You have located some housing that you can lease for 10,500 Hong Kong dollars per month. What is the cost per month in U.S. dollars if the exchange rate is HK$1 = $0.1290? $1,208.15 $1,354.50 $78,311.27 $81,395.35 $84,206.19

$1,354.50

Pete's Warehouse has net working capital of $2,400, total assets of $19,300, and net fixed assets of $10,200. What is the value of the current liabilities? -$6,700 -$2,900 $2,900 $6,700 $11,500

$6,700

Which one of the following has the highest effective annual rate? 6 percent compounded annually 6 percent compounded semi-annually 6 percent compounded quarterly 6 percent compounded monthly All the other answers have the same effective annual rate.

6 percent compounded monthly

Which one of the following statements is correct? Assume the pre-tax cost of debt is less than the cost of equity. A firm may change its capital structure if the government changes its tax policies. A decrease in the dividend growth rate increases the cost of equity. A decrease in the systematic risk of a firm will increase the firm's cost of capital. A decrease in a firm's debt-equity ratio will decrease the firm's cost of capital. The cost of preferred stock decreases when the tax rate increases.

A firm may change its capital structure if the government changes its tax policies.

Which one of the following measures the amount of systematic risk present in a particular risky asset relative to that in an average risky asset? Squared deviation Beta coefficient Standard deviation Mean Variance

Beta coefficient

Which one of the following actions will increase the current ratio, all else constant? Assume the current ratio is greater than 1.0. Cash purchase of inventory Cash payment of an account receivable Cash payment of an account payable Credit sale of inventory at cost Cash sale of inventory at a loss

Cash payment of an account payable

Which one of the following terms best refers to the practice of investing in a variety of diverse assets as a means of reducing risk? Systematic Unsystematic Diversification Security market line Capital asset pricing model

Diversification

Which one of the following is a measure of long-term solvency? Price-earnings ratio Profit margin Equity multiplier Receivables turnover Quick ratio

Equity multiplier

The U.S. dollar equivalent is 0.4502 for the Brazilian real and 1.4729 for the U.K. pound. Which one of the following statements is correct given this information? One U.S. dollar will buy 0.4502 Brazilian reals. If you have 0.4502 Brazilian reals, they are worth 1.4729 U.K. pounds. One U.K. pound will buy 1.4729 U.S. dollars. One Brazilian real will buy 1.4729 U.K. pounds. One U.S. dollar will buy 1.4729 U.K. pounds.

One U.K. pound will buy 1.4729 U.S. dollars.

Which one of the following describes systemic risk? Risk that affects a large number of assets An individual security's total risk Diversifiable risk Asset specific risk Risk unique to a firm's management

Risk that affects a large number of assets

Which one of the following statements is correct? Shareholders' equity is the residual value of a firm. Net working capital must be a positive value. An increase in cash reduces the liquidity of a firm. Equipment is generally considered a highly liquid asset. Depreciation increases total assets.

Shareholders' equity is the residual value of a firm.

Later this week, you are traveling from the U.S. to Canada for a week's vacation. This morning, you exchanged some U.S. dollars for Canadian dollars in preparation for that trip. Which one of the following best describes this exchange? Forward trade Spot trade Arbitrage transaction Cross-rate exchange Eurocurrency transaction

Spot trade

Suppose you could buy 1,320 South Korea won or 78 Pakistan rupees last year for $1. Today, $1 will buy you 1,318 won or 80 rupees. Which one of the following occurred over the past year? The dollar appreciated against the won. The dollar depreciated against the rupee. The dollar appreciated against both the won and the rupee. The won depreciated against the dollar. The rupee depreciated against the dollar.

The rupee depreciated against the dollar.

The modified internal rate of return is specifically designed to address the problems associated with which one of the following? Mutually exclusive projects Unconventional cash flows Long-term projects Negative net present values Crossover points

Unconventional cash flows

Lester lent money to The Corner Store by purchasing bonds issued by the store. The rate of return that he and the other lenders require is referred to as the: pure play cost. cost of debt. weighted average cost of capital. subjective cost. cost of equity.

cost of debt.

A firm has a current ratio of 1.4 and a quick ratio of 0.9. Given this, you know for certain that the firm: pays cash for its inventory. has more than half its current assets invested in inventory. has more cash than inventory. has more current liabilities than it does current assets. has positive net working capital.

has positive net working capital.

A common-size balance sheet helps financial managers determine: which customers are paying on a timely basis. if costs are increasing faster or slower than sales. if changes are occurring in a firm's mix of assets. if a firm is generating more or less sales per dollar of assets than in prior years. the rate at which the firm's dividends are changing.

if changes are occurring in a firm's mix of assets.