FINA FINAL

What is the probability index of a project that has initial investment $60,000, annual cash flows of $20,000 for 4 years and IRR of 12.6%

There is not enough information to solve this problem

Suppose the interest rates ( and therefore, the firms weighted average costs of capital increases) this does NOT change the capital budgeting choices firm would make if it

Use the payback period analysis

A lottery ticket...

$1,840

which of the following is false regarding 1 The income statement reflects a summary that occurs over some time period of time while the balance sheet is a snapshot taken single point of time 111. The two statements taken, together give an accurate, estimate of the firms cash flow and market value

1 and 111 only

how many of these items decrease cash flow statements of cash flows

5 of these items decrease cash flows

THE CANADADIAN GOVERMENT

769.50

Project selection ambiguity can arise if one relies on IRR of NPV when

A projects cash flows are not convient

The concept of time value of money is important to financial decision making because

ALL OF THESE OPTIONS ARE TRUE

which of the following is NOT a component in Dupoint identity

ALL of these are components of the Dupoint identity

Assume a project has normal cash flows (that is, the initial cash flow is negative, and all other cash flows are positive). Which of the following statements is most correct?

All else equal, a projects NPV increases as the cost of capital declines

Normal projects C and D are mutually exclusive. Project C has a higher (positive) net present value if the cost of capital is less than 12 percent, whereas Project D has a higher (positive) net present value if the cost of capital exceeds 12 percent. Which of the following statements is most correct?

All three of these statements are correct

which of the statements below is true

An increase in working capital can be brought about by an increase in inventory or accounts recievable

to calculate changes in net working capital from one period to the next, we need which of the following

Balance sheet

LOCKEYS PROJECT IS EXPANDING ITS PRODUCT LINE

Both Projects

Which of the following ratios could capture a firms ability to service its loans

Both times interest earned (TIE) ratio and cash coverage ratio

how many of the items found on income statement, rather than balance sheet

Four of these items

Which of the following cannot be calculated

Future value of a perpetuity

If the calculated net present value (NPV) is negative, which of the following must be CORRECT. The discount rate used is:

GREATER than the Internal rate of return

Having ownership of the company through common stocks provides the stockholders with 1. A share in the nets of a profit 2. Voting rights

I and II

A chief financial officer (CFO) is the top finance officer in a firm which function is CFO involved with 1. capital budgeting 2. cost of capital budgeting 3. working capital management

I, II, and III

Which of the fowling regarding preferred stocks is true

If the required rate of returns increase the price decreases

Which of the following will result increase in cash flows

Increase in accounts payable

A firm is considering an investment in a project whose risk is greater than the current risk of the firm, based on any method for assessing risk in evaluating this asset, the decision maker should

Increase the cost of capital, used to evaluate the project to reflect the projects higher risk.

Which of the following investments accumulates more interest in a year

Investment B

Which of the following statements regarding investment in working capital is incorrect

Investment in working capital, unlike investment in plant, property and equipment, represents positive cash flow

Which of the following is false about junk bonds

Junk bonds must be bad investment and should be avoided

which of the following is not an advantage of sole propietorship

Limited liability

A NPV of zero implies that an investment

NONE of these are correct

Which of the statements below is TRUE

NONE of these are correct

The _______ model is usually considered the best of capital budgeting decision models

Net Present Value

which of the following would indicate an accurate statement of cash flows

Net cash flow is equal to the CHANGE in the cash balance in the balance sheet

In a statement of cash flows which category includes depreciation expense

None of these, depreciation is a non cash expense

Which of the following statements is most correct

One of the disadvantages of the sole proprietorship form of organization is that there is unlimited liability

Which of the following would not be classified as current asset

Property, Plant and Equipment

if the total assets of a firm increase while all other components of ROE remain unchained, you would expect the firms

ROE to remain unchanged

which of the following is true regarding the WACC

The WACC is the required return on any investment a firm makes that has a level of risk equal to that of present operations

Assume that a newly project a TOP TECHNOLOGY INC....

The problem can't be solved because the tax rate is not given

Which of the following is not a capital budgeting question

The proper mix of stocks and bonds to hold for financing assets

A firm with zero net working capital must have

a quick ratio of less than 1.0

companies that have higher risk premium than competitor in same industry will generally have

all of the options

the after tax cost of debt is almost always below

all of the options are true

which of the following function secondary market

all of these are correct

ratio analysis can be used for

all of theses choices are true

which of the following assets will an individual investor prefer if she is NOT risk adverse and would like to maximize her expected return

an asset beta greater than 1

Investors and financial analyst wanting to evaluate the operating efficiency of a firms managers would primarily look at the firms

asset management ratios

The means by which a company is financed is the firms

capital structure

The net income figure on an income statement is calculated before conducting

cash dividents

the most rigorous test of a firms abilities stock pay its short term obligations is its

cash ratio

you would like to buy first apartment....

choose alternative 2

____ are expected to turn to cash near future while _____ are expected to fulfill near future, difference between

current assets, current liabilities, net working capital

the annual dollar interest received for annual (coupon payment) divided by the market price of the bond is called the

current yield

365 divide by (COGS/inv) measures

days sales in inventory

holding all else equal, if the beta of a stock increases, the stocks price will

decrease

Which of the following will increase a fins times interest earned ratio

decrease in cost of goods sold

which of the following will increase present value interest rate

decrease interest

select the best (most informative) answer present value involves _____

discounting future cash flows whereas future value involves compounding cash flow today

common stock can be valued as perpetuity if the

dividends are not expected to grow

the present value of a perpetuity can be determined by

dividing the payment by the interest rate

the cost of debt for a firm..

even if the bonds not publicly traded

a bonds par value can also be called its

face value

When a firm's earnings are falling more rapidly than its stock price, its P/E ratio will

go up

The net present value profile

grqphically portrays the relationship between the discount rate and the net present value

A firm has a negative working capital

has more current liabilities than current assets

Investments with low return variances

have realized returns close to expected returns

Lisa is 58 years old

her fund will last forever and she will never run out of money

why is the after-tax cost of debt normally lower than the after-tax cost of preferential stock

interest on debt is tax deductible

the quick ratio is the same as the current ratio except the current ratio does not consider

inventories

which of the following is correct for a bond currently selling at premium to par

its current yield is lower than its coupon rate

A short term creditor would be most interested in

liquidity ratios

All other things equal

lower, operating

The slope of an asset's security market line is the:

market risk premium

the expected rate of return on a stock portfolio is a weighted average of expected returns of each stock in the portfolio, where the weights are based on

market value of the the investment in each stock

the fundamental goal of financial management should be

maximize the current value per share of existing stock

Which of the following is not accurate in depicting cash flows from operations

net profit + depreciation + tax paid

the return standard deviation of a portfolio

none of these are correct

If bond makes a coupon payment semi-annually, all of the following adjustments must be made in pricing the bond except

number of years of maturity divided by 2

Current period depreciation expense is listed

on the income statement

what is the characteristic of the price of preferred stock

preferred stock is valued as a perpetuity

In a general sense, the value of any asset is the

present value of the cash flows expected to be received from the asset

In general sense, the value ofd any asset is the

present value of these cash flows expected to be received from asset

An investor buys a new stock offering of LinkedIn shares through LinkedIn investment baker most accurate description

primary market description

In a agency theory the owners of the business are ___ and the managers are ____

principals and agents

Two investments C and D are being evaluated

recommend C if required return is between 0% and 9%

when an account represents cumulative earnings of the firm started minus dividends paid

retained earnings

agency theory theoretically belongs to

shareholders

A _______ can lose in extreme cases her entire personal net worth

sole propietor , general partner

A bond indenture least likely specifies the

sources of funds for repayment

Which of the following statements bout the call provision of a bond is most accurate? A call provision

stipulates whether and under what circumstances the issuer can redeem or repay the bond prior to maturity

The CFO of axis manufacturing is introducing its product.....

sunk cost, positive side effect

A quick ratio that is much smaller than the current ratio indicates

that a large portion of current assets is in inventory

You want to start saving for the future....

the balance of option 2 is about $51 higher

the financial statement showing what the company own is called

the balance sheet

Doug...

the bond is undervalued he should purchase

which of the statements below is false

the discounted payback period method is the time it takes to recover the initial investment in future dollars

Valuation of financial assets requires knowledge of

the expected future cash flows of the asset and the appropriate discount rate

In a present value (NPV) profile, the internal rate of return is represented as

the intersection of the NPV profile and the horizontal axis

which of the following statements regarding bond pricing is true

the lower the yield to maturity, the more valuable the bond is

Increasing the number of periods will increase all of the following EXCEPT

the present value of $1 received in the future

If a company uses cash to payoff some of its accounts payable, what effect will this have on its liquidity ratios given the ratios exceed 1.0 before the payoff

the quick ratio and the current ratio will both increase

the intercept point of the security market line is the rate of the return which corresponds to

the risk free rate

your firm disposes an asset that is worthless in the open market but still has remaining un-deprecation book value

the tax multiplied by remains book value

the accelerate depreciation of capital investment in MACRS

time-value of money

the value of a common stock is based on

values the future benefits (cash flows) to the holder

the variance of investments returns is a measure of

volatility of the rates of return

The rate of return required by investors. in the market for owning a bond is called the

yield to maturity