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
