corporate finance final
In which ownership structure can money be raised by selling new stock but only the first time the stock is sold? Corporation Sole proprietorship General partnership Limited partnership
Corporation
In which ownership structure is liability in the event of bankruptcy limited for all owners? Corporation Sole proprietorship General partnership Limited partnership
Corporation
you are contemplating enrolling in the MBA program at the UNC Business school. You have decided that the risk associated with earning an MBA is consistent with the risk associated with investing in the zero-coupon bonds issued by the Alpha Corporation. This alpha bond will pay 10,000 when it matures in 10 years. It is currently selling for 6,000. What r should you use to discount the cash flows associated with earning a Keanan Flager MBA? Related question 2: What is the r implicit in the price of the bond described above? 1.052 0.052 10.52% none
0.052
The next 2 questions are based on this prompt: Wasel Works pays annual dividends. The first dividend will be paid in exactly 1 year. You expect WW's first dividend to be 1$ and you expect that after that the dividend will grow at a 3% annual rate forever. If r = 12% what is a share of WW worth? Related question 2: Given the information directly above, what is the share of WW's worth? 3.33 9.99 11.11
11.11
Suppose the monthly rate (rho) on a 5 year 10,000 constant total payment amortized loan (the king of amortized loan we discussed in class) = 0.5% what will the monthly payment be? 193.32 193.33 234.85 None of the above
193.33
How would someone who understands the basic principals of the time value of money rather be paid 30,000? 30,000 today 20,000 today and 10,000 next year 15,000 today and 15,000 next year 10,000 today and 20,000 next year
30,000 today
The next 2 questions are based on this prompt: Wasel Works pays annual dividends. The first dividend will be paid in exactly 1 year. You expect WW's first dividend to be 1$ and you expect that after that the dividend will grow at a 3% annual rate forever. If r = 12% what is a share of WW worth? Related question 1: Which of the Key Finance equations is easiest to use to solve this question? 2 7 13 14
7
Related question 4: If zylox's r= 8% what is the net present value of developing the zphone x? 125 mill 80 mill 100 mill 85 mill
80 mill
Related question 5: if zylox's r =8% what is the net present value of developing the zphone Y? 100 mill 80 mill 85 mill 125 mill
85 mill
Which of the following is an example of diversifiable risk Options c and d are both correct Neither options are correct A bank loses 1 million after its president has a scandalous affair A recession
A bank loses 1 million after its president has a scandalous affair
Who addresses the three basic problems in corporate finance? All the options below are correct A firm's financial manager A firm's owners A firm's customers
A firm's financial manager
Which of the following best defines the concept of corporate governance? - A system for monitoring managers' activities rewarding performance and disciplining misbehavior Corporate values and governance structures that ensure the business is conducted in an ethical competent fair and professional manner. A system of principles policies and procedures used to manage and control the activities of a corporation so as to overcome conflicts of interest inherent in the corporate form A board of directors to assist management in addressing the 3 basic problems of corporate finance.
A system of principles policies and procedures used to manage and control the activities of a corporation so as to overcome conflicts of interest inherent in the corporate form
An advantage of the net present value method over the internal rate of return method is: All of the answers below are correct The internal rate of return cant be used when cash flows are unconventional The internal rate of return cant be used when projects are mutually exclusive The internal rate of return method requires many more calculations
All of the answers below are correct
Accountants consider which of the following "inventory" The raw materials used to build aircraft engines Machined aircraft engine parts ready for assembly Completed aircraft engines ready for sale All of the options are correct
All of the options are correct
How might a firm's managers use financial ratio analysis? All of the options below are correct Manage assets in a amaner that maximizes shareholder value Manage operations in a manner that maximizes shareholder value Manage financial risk in a manner that maximizes shareholder value
All of the options below are correct
Leverage Occurs when firms buy assets using external funds Increase the financial risk a firm faces Can increase a firm's ROE All the options above are correct
All the options above are correct
The difference between financial management and accounting is: All the options are correct The time orientation for financial accounting is the past, for management accounting, it is the future The primary audience for financial accounting is external, for management accounting it is internal Financial accounting is relatively formal (bound by GAAP) management accounting is relatively informal (not bound by GAAP)
All the options are correct
Which of the following statements is correct? All the options are correct The positive relationship observed between risk and return in financial markets is consistent with the hypothesis that the average investor is risk-averse Someone who chooses an auto insurance company with the largest deductible possible is demonstrating through their behavior that they are less risk-averse than someone who chooses the smallest deductible possible Someone who is risk-averse is willing to give up some expected return in exchange for facing less risk.
All the options are correct
Which statement about balance sheets is correct: All the statements are correct Represent what economists call a stock Make use of the balance sheet identity TA=TL + OE Summarize financial variables at a particular point in time
All the statements are correct
The difference between book and market value is: All the statements below are correct Book value is calculated by accountants and is based on historical cost while market value is calculated by economists and financial anaalysts and is based on current stock prices Book value is more important to managers because their principle duty is to maximize its value To calculate market value an accountant dereciates the vale of expenditures on tangiablle assets and capitalizes the value of expenditures on intangible assets but does not when calculating book value.
Book value is calculated by accountants and is based on historical cost while market value is calculated by economists and financial anaalysts and is based on current stock prices
The difference between book and market value is: All the statements below are correct Book value is more important to managers because their principle duty is to maximize its value To calculate market value, an accountant depreciates the value of expenditures on tangible assets and capitalizes the value of expenditures onn intangible assets but does not when calculating book value. Book value is calculated by accountants and is based on historical cost while market value is calculated by economists and financial analysts and is based on current stock prices.
Book value is calculated by accountants and is based on historical cost while market value is calculated by economists and financial analysts and is based on current stock prices.
The next 2 questions are based on this prompt: If your r =5% what is the maximum you should be willing to pay for a coupon bond maturing in exactly 20 years that has a 10,000 maturation value and will make one 400$ coupon payment every year until it matures? Related question 1: which combination of key finance equations are easiest to use to answer this question? Both 1 and 5 Both 1 and 6 Both 2 and 5 Both 2 and 6
Both 1 and 5
Related question 7: Remembering that the prejects are mutually exclusive and that Zylox's r=12% which iphone should zylox develop? Develop only the iphone x Develop only the iphone y
Develop only the iphone x
Related question 6: Remembering that the prejects are mutually exclusive and that Zylox's r=8% which iphone should zylox develop? Develop only the iphone x Develop only the iphone y
Develop only the iphone y
Which of the following is an example of conflict of interest that an effective corporate governance system would mitigate or eliminate? A majority of the board is independent of management Directors identify with they managers interests rather than those of the shareholders Directors have board experience with companies regarded as having sound governance practices Directors identify with the shareholders' interest rather than those of the managers
Directors identify with they managers interests rather than those of the shareholders
When calculating the monthly rate (rho) on an amortized loan, the annual interest rate r must be: Multiplies by 12 Divided by 12 Subtracted from 12 Added to 12
Divided by 12
you are contemplating enrolling in the MBA program at the UNC Business school. You have decided that the risk associated with earning an MBA is consistent with the risk associated with investing in the zero-coupon bonds issued by the Alpha Corporation. This alpha bond will pay 10,000 when it matures in 10 years. It is currently selling for 6,000. What r should you use to discount the cash flows associated with earning a Keanan Flager MBA? Related question 1: Which of the Key finance equations is easiest to use to answer this question? Equation 1 Equation 3 Equation 5 Equation 7
Equation 3
In which of ownership structure is liability in the event of bankruptcy limited for some owners but not others? Corporation Sole proprietorship General partnership Limited partnership
Limited partnership
Homer Simpson is considering buying shared in Eye Caramba, a Springfield-based optometry chain. Shares selling for 10$ and Homer and Bart expect the first dividend to be 1.00$ and they expect it to be paid in exactly one year. Homer and Bart expect the dividend to grow at 8% forever. All agree that the correct r on this investment is 6% None of the responses are correct Homer: oh! What a horrible investment it has a negative present value Bart: don't have a cow man, its present value is 50$ so it is a great investment Lisa: Dad, a company's dividends can't grow at an 8% forever! But even if its dividends grow at a more reasonable 2% annual rate, its present value is $25 so it is a great investment.
Lisa: Dad, a company's dividends can't grow at an 8% forever! But even if its dividends grow at a more reasonable 2% annual rate, its present value is $25 so it is a great investment.
Which statement about income statements is incorrect: None of the statements is correct Represents what economists call a flow Summarize financial events over a particular period of time Make use of the income identity: net plant and equipment = accumulated historic cost - depreciation
Make use of the income identity: net plant and equipment = accumulated historic cost - depreciation
When conducting a capital budgeting analysis, which of the following is an example of an unconventional cash flow pattern? Options c and d are both correct Neither options are correct Negative in the first period, positive every period after that Negative both first and last period.
Negative both first and last period.
When conducting a capital budgeting analysis, which of the following is an example of a conventional cash flow pattern? Options c and d are both correct Neither option c nor d is correct Negative in the first period, positive every period after that Negative in the first and last period.
Negative in the first period, positive every period after that
If your r =5% what is the maximum you should be willing to pay for a coupon bond maturing in exactly 20 years that has a 10,000 maturation value and will make one 400$ coupon payment every year until it matures? Related question 2: If your r = 6% what is the maximum you should be willing to ay for a coupon bond maturing in exactly 20 years that has a $10,000 maturation and will make one $500 coupon payment every year until it matures? 5734.96 8853.01 10,500.00 None of the options are within 1$
None of the options are within 1$
Which of the following is an example of a non-diversifiable risk Options c and d are both correct Neither options are correct The effect of alpha corp's net income of the covid pandemic recession The affected alpha corp of a change in the structure of interest rates as a result of a monetary policy initiated by the US federal reserve
Options c and d are both correct
Related question 3: Iz Zylex chooses to answer their question using the Net Present Value methos, which equation should they use to calculate the NPV of the annual addition to net income? PVp = (FVp / r)
PVp = (FVp / r)
The dupont identity is most useful for: Remembering the three principle routes available for management to increase their firm's ROE Quickly calculating the degree of leverage a firm faces Quickly calculating ROA Quickly calculating the ROE
Remembering the three principle routes available for management to increase their firm's ROE
In which ownership structure is there no agency problem? Corporation Sole proprietorship General partnership Limited partnership
Sole proprietorship
How does economic theory explain the fact that the average return on the stock since 1926 has been 7 percentage points higher than the return on corporate bonds? Bonds default Stocks pay dividends bonds don't Bonds are more valuable to inflation Stock returns have a higher standard deviation
Stock returns have a higher standard deviation
Related question 3: Suppose you've changed your mind and decided that the alpha bond really doesnt pose a risk similar to that of earning a MBA, but the Beta bond (8%) gamma bond (14%) Kappa bond (12%) Zeta bond (10%) are all comparable in risk to earning a MBA. What r should you use to discount the cash flows associated with earning an MBA? The Beta bond The gamma bond The kappa bond The zeta bond
The Gamma bond
Which of the following statements is true: All of the options are correct The higher your personal r the more likely it will be that earning a UNC MBA makes sense The higher your personal r the more likely it is that it will make sense for you to sell your winning lottery ticket The higher your personal r, the higher the present value of a future payment.
The higher your personal r the more likely it is that it will make sense for you to sell your winning lottery ticket
Which of the three basic problems of corporate finance concerns fixed assets: All the options below are correct The capital structure problem The capital budgeting problem The working capital management problem
The capital structure problem
Which of the three basic problems of corporate finance concerns long term debt and owners equity: All the options below are correct The capital budgeting problem The capital structure problem The working capital management problem
The capital structure problem
Historic returns on US small company index funds are higher than those on US large company index funds. Further, the returns on small company funds are more variable than those on large-company funds. This pattern is called: The fundamental financial Relationship the fundamental financial Observation The fundamental financial Principle The fundamental financial Fact
The fundamental financial Relationship
The expression the triple bottom line refers to making management decisions that take into account the combination of the following: The impact on book value, owner's equity, and market capitalization The impact on book value, owner's equity, and leverage The impact on book value, market capitalization, and leverage The impact on people the plant and profit
The impact on people the plant and profit
For a lottery winner to be willing to sell their right to their winning cash flow to an investor, for the investor to be willing to buy that right, and for both to perceive that they have gained from that trade: None of the options are correct The lottery winner must have a higher r with respect to the cash flow that the investor The investor must have a higher r with respect to the cash flow than the lottery winner The lottery winner and the investor must have the same r
The investor must have a higher r with respect to the cash flow than the lottery winner
Related question 1: which capital budgeting method or methods can be used to answer this question? The internal rate of return The payback method with n <4 The net present value method All the options are correct
The net present value method
Market capitalization is: The number of a corporation's outstanding shares multiplied by their price per share Expensing the costs to acquire an asset over the life of the asset The market for fixed assets A corporation's book value.
The number of a corporation's outstanding shares multiplied by their price per share
The principle agent or agency problems arise from: The imposition of contradictory rules and regulations by government agencies The difficulties government face interpreting financial statements prepared using non GAAP standards The unlimited liability faced by agents responsible for sole proprietorships The separation of a firm's ownership and management
The separation of a firm's ownership and management
One of the 3 capital budgeting methods that do not take into account the time value of money. The internal rate of return The payback method The net present value All 3 take it into account
The payback method
One reason the final cash flow in a capital budgeting analysis could be positive is Options c and d are both correct Neither options are correct The project ends with a salvage value The project ends with a shutdown cost
The project ends with a salvage value
One reason the final cash flow in a capital budgeting analysis could be negative is Options c and d are both correct Neither options are correct The project ends with a salvage value The project ends with a shutdown cost
The project ends with a shutdown cost
When calculating the amount of money a lottery company would need to start with to generate enough money to pay the promised lottery payments, the letter r represents: The yield to maturity The required rate of return The interest rate charged by the lender The interest rate the company expects to earn on its investment
The required rate of return
When calculating the amount of money an investor would be willing to pay to buy someone else's coupon bond, the letter r represents the investors: The yield to maturity The required rate of return The interest rate charged by the lender The interest rate earned on the company's investments
The required rate of return
Related question 2: if zylex chooses to answer their question using the net present value method which equation should they use to calculate NVP of the development costs (which are immediate) They don't need an equation since a dollar today is worth a dollar today Only if r > g: PV ...
They don't need an equation since a dollar today is worth a dollar today
To which of the following three basic problems of corporate finance does the following statement apply: "especially it is about the trade-off between liquidity risk and opportunity cost" All the options are correct The capital structure problem The capital budgeting problem The working capital management problem
The working capital management problem
Which of the following three basic problems of corporate finance concerns current assets and liabilities? All the options below are correct The capital budgeting problem The capital structure problem The working capital management problem
The working capital management problem
In 1970 noble prize winning economist Milton Friedman argued that the principal duty of the financial manager of a firm is: The maximize the firm's book value To maximize the firm's owners equity To maximize the firm's market capitalization To maximize the leverage the firm's owners
To maximize the firm's market capitalization
The traditional answer to the question "what is the principal duty of the financial manager of a firm" is: To maximize the firm's book value To maximize the firm's owners equity To maximize the firm's market capitalization To minimize the leverage the firm's owners face
To maximize the firm's market capitalization