UGA FINA 3000 Final T/F Practice
A tweet by Elon Musk on January 7th caused shares of Facebook to increase by 25% in one day
False
An IRR = 0% represents that the project has reached its break even point
False
Dr. Pope described his investing style as active during class since his goal is to beat the market
False
Dr. Pope felt that the rising price of Gamestop was justified by revenue growth and earnings for the company
False
For mutually exclusive projects, we defer to the IRR rule over the NPV rule to determine the best project
False
Four our project cash flow equation, we subtract interest since that creates a positive cash flow for the firm
False
If you sell an asset at a loss, the tax implication is zero... you do not pay taxes on the sale and there is not a tax credit that you can take
False
In calculating the variance for an N asset portfolio, the individual variance terms are more important than the covariance term
False
In class, we used the pandemic as an example of a firm specific risk
False
In general, we can say that the greater the risk, the lower the expected return
False
In our current event, we discussed that Tesla added Bitcoin to its balance sheet... Bitcoin is considered cash on the balance sheet
False
Market capitalization is simply last year's shareholder equity plus the new addition to retained earnings
False
One advantage of a sole proprietorship is that the owner has limited liability
False
Statistics show that active managed funds tend to outperform passively managed funds over the last 10 years
False
Stock A has a larger standard deviation that stock B... by definition, the beta for stock A will be larger than the beta for stock B
False
The Biden Administration is proposing to increase the tax rate from 21% to 28% and the impact of this would be at lease a 7% drop in value of the S&P 500
False
The March jobs report number for new jobs was less than expectations were
False
The beta of a Treasury Bill equals 1
False
The greater the number of compound periods, the greater the PV of an investment
False
The market portfolio is composed of diversifiable and non-diversifiable risk
False
A firm announces that it is decreasing its dividend payout rate... using our stock pricing models, this would translate to an increase in the current stock price
True
A stock with a beta greater than 1 has greater systematic risk than the average investment in the economy
True
A. project could meet a company's payback rule but still have a negative NPV
True
All else equal, a firm with a larger deb-to-equity ratio would be considered a greater default risk
True
An apartment lease is an example of an annuity due
True
An investor might "short" a stock if they believe that the stock price will decline in the immediate future
True
As an investor, we would say that a small cap fund is more likely to be risky than a large cap fund
True
Disney is building a Guardians of the Galaxy roller coaster in the EPCOT theme park... this new ride is likely to create synergy and positive side effects for the entire company
True
For a fast food chain, we said that gross profit margin is the most important profitability ratio
True
For an amortized loan, the amount of principal reduction increases with each payment
True
For an independent project, we accept the project if the cost of capital is less than the IRR
True
For growing a firm, investors prefer the corporate form of business
True
For the weighted average cost of capital, we use market values over book values for our weights whenever possible
True
If we increase the growth rate in the annual cash flows, the PV of a growing annuity will increase also
True
If we increase the interest rate, the future value of an investment increases also
True
If we increase the interest rate, the value of a perpetuity decreases
True
In our current event on the financial crisis, one mistaken belief was that houses could be viewed as investments, not just places to live
True
The cost of capital equation is found by using the YTM of existing company debt if possible
True
The effective annual rate can be equal to the annual percent rate
True
The yield to maturity for a bond reflects the annual return an investor will receive from purchasing a bond at the current price and holding until maturity
True
