FIN320F Final

6.11%

A stock has an expected return of 11.3 percent and a beta of 1.08. The risk-free rate is 4.7 percent. What is the slope of the security market line?

Spot Trade

A trader in Switzerland just agreed to trade Swiss francs for British pounds based on today's exchange rate. The trade is expected to settle tomorrow. What term best describes this exchange?

112000

Green Woods sells specialty equipment for mountain climbers. Its sales for last year included $387,000 of tents and $718,000 of climbing gear. For next year, management has decided to sell specialty sleeping bags also. As a result of this change, sales projections for next year are $411,000 of tents, $806,000 of climbing gear, and $128,000 of sleeping bags. How much of next year's sales are derived from the side effects of adding the new product to its sales offerings?

zero

If an investment is producing a return that is equal to the required return, the investment's net present value will be:

private

If the financial markets are semistrong form efficient, then only individuals with __________ information have a marketplace advantage.

9.07

International Exchange has three divisions: A, B, and C. Division A has the least risk and Division C has the most risk. The firm has an aftertax cost of debt of 6.1percent and a cost of equity of 14.3 percent. The firm is financed with 37 percent debt and 63 percent equity. Division A's projects are assigned a discount rate that is 2.2 percent less than the firm's weighted average cost of capital. What is the discount rate applicable to Division A

unconventional cash flows

The modified internal rate of return is specifically designed to address the problems associated with: ______________ ____________ ____________

changes in net working capital

The pro forma income statements for a proposed investment should include all of the following except: depreciation expense. taxes. fixed costs. changes in net working capital. forecasted sales.

depreciation

The tax shield approach to computing the operating cash flow, given a tax-paying firm: recognizes that _____________creates a cash inflow.

decrease

A increase in taxes would _________ the aftertax cost of debt for a firm?

Brazil;$385.55

ou are debating between spending a week in Brazil or a week in Chile. You've estimated the cost of the Brazilian trip at 56,300 reals and the Chilean trip at 13.6 million pesos. The currency per U.S. dollar is 2.5658 reals and 609.10 pesos. If you prefer the less expensive trip, as measured in U.S. dollars, you should travel to _____ because you can save ____. _____________;$__________

-41190

A new project is expected to generate an operating cash flow of $38,728 and will initially free up $11,610 in net working capital. Purchases of fixed assets costing $52,800 will be required to start up the project. What is the total cash flow for this project at Time zero?

$74857.20

A project requires $428,000 of equipment that is classified as seven-year property. What is the depreciation expense in Year 3 given the following MACRS depreciation allowances, starting with Year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent?

46451.08

A project will reduce costs by $62,750 but increase depreciation by $14,812. What is the operating cash flow of this project based on the tax shield approach if the tax rate is 34 percent?

11.10%

A stock has an expected return of 10.9 percent, its beta is .96, and the risk-free rate is 6.05 percent. What must the expected return on the market be?

increases

Assume an all-equity firm has positive net earnings. The operating cash flow of this firm ___________ when tax rate decreases

Triangle Arbitrage

Assume you can exchange $1 for either ?1 or ?.50 in the U.S. In the London market, you can exchange ?1 for ?.52. This situation creates an opportunity to profit immediately from which one of the following?

C$0.009625/Y1

Assume you can exchange $1 for either C$1.1417 or ¥118.62. What is the cross-rate between the Canadian dollar and the Japanese yen? C___________/Y______________

L0.7957/e1

Assume you can exchange $1 for either €.8031 euro or £.6390. What is the cross-rate between the pound and the euro? L__________//e___________

69.97

Bermuda Cruises issues only common stock and coupon bonds. The firm has a debt-equity ratio of .45. The cost of equity is 17.6 percent and the pretax cost of debt is 8.9 percent. What is the capital structure weight of the firm's equity if the firm's tax rate is 35 percent? Answer in Percent

A

New Labs just announced that it has received a patent for a product that will eliminate all flu viruses. This news is totally unexpected and viewed as a major medical advancement. Which one of the following reactions to this announcement indicates the market for New Labs stock is efficient? A) The price of New Labs stock increases rapidly to a higher price and then remains at that price. B) The value of all stocks suddenly increase and then level off at their higher values. C)The price of New Labs stock increases rapidly and then settles back to its pre-announcement level. D)All stocks quickly increase in value and then all but New Labs stock fall back to their original values. E)The price of New Labs stock remains unchanged.

primary market

Newly issued securities are sold to investors in which one of the following markets?

30.89%

One year ago, Peyton purchased 7,200 shares of Broncos stock for $329,640. Today, he sold those shares for $58.92 a share. What is the total return on this investment if the dividend yield is 2.2 percent?

$1026

One year ago, you purchased 600 shares of stock for $14 a share. The stock pays $.41 a share in dividends each year. Today, you sold your shares for $15.30 a share. What is your total dollar return on this investment?

publicly

Semistrong form market efficiency states that the value of a security is based on: All ________ available information

9.71

Stock in ABC Enterprises has a beta of 1.28. The market risk premium is 7.4 percent, and T-bills are currently yielding 3.6 percent. ABC's most recently paid dividend was $1.62 per share, and dividends are expected to grow at an annual rate of 2 percent indefinitely. If the stock sells for $38 a share, what is your best estimate of ABC's cost of equity? Answer in percent

-5.56%

Suppose a stock had an initial price of $36 per share, paid a dividend of $.42 per share during the year, and had an ending share price of $34. What was the capital gains yield?

1.5649

The U.S. dollar equivalent is .3897 for the Brazilian real and 1.5649 for the UK pound. One UK Pound will buy ___________ US Dollars

sunk

The analysis of new projects should exclude _________ costs

13.82

The common stock of Contemporary Interiors has a beta of 1.13 and a standard deviation of 21.4 percent. The market rate of return is 12.7 percent and the risk-free rate is 4.1 percent. What is the cost of equity for this firm? Answer in Percent

True

True or False: The addition of a risky security to a fully diversified portfolio: may or may not affect the Portfolio Beta

True

True or False: US Treasury Bills can outperform and underperform against inflation

True

True or False: Venture Capitalists usually have an Exit Strategy

Tombstone

What is the advertisement, commonly found in financial newspapers, that announces a public offering of securities and provides the name of the underwriters called?

Prospectus

What is the legal document called that is provided to potential investors and describes a new security offering?

NPV

Which one of the following indicators offers the best assurance that a project will produce value for its owners? Positive ____

ECN

Which one of the following is an electronic network that enables Katie to sell her shares of ABC stock directly to Marti?

erosion

Which one of the following terms is most commonly used to describe the cash flows of a new project that are simply an offset of reduced cash flows for a current project?

Foreign Bonds

Which one of the following terms is used to describe international bonds issued in a single country and generally denominated in that country's currency?

591180000

Winnebagel Corp. currently sells 28,300 motor homes per year at $74,500 each and 7,300 luxury motor coaches per year at $116,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 23,300 of these campers per year at $20,500 each. An independent consultant has determined that if the company introduces the new campers, it should boost the sales of its existing motor homes by 2,900 units per year and reduce the sales of its motor coaches by 880 units per year. What is the amount to use as the annual sales figure when evaluating this project?

Cross-Rate

You are given the exchange rate between the U.S. dollar and the Canadian dollar. You are also given the exchange rate between the U.S. dollar and the Mexican peso. What is the name given to the Canadian dollar per Mexican peso exchange rate derived from the information that was provided?

American Depository Receipt

You live in the U.S. and want to invest in a Chinese company, which will be referred to as "CC," because you believe its stock is uniquely positioned to be unusually profitable over the next five years. However, you do not have direct access to the Chinese financial markets. You may be able to indirectly invest in CC by purchasing a(n):

decrease

a __________ in Fixed Costs will increase the operating cash flow as computed using the tax shield approach