UGA FINA 3000 Final T/F Practice

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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


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