Fin 571 guide 1 33) Boeing Corporation is a world leader in commercial aircraft. In the face of competition, Boeing often faces a critical __________ decision: whether to develop a new generation of passenger aircraft.  A. payback  B. present value  C. di
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Fin 571 guide 1 33) Boeing Corporation is a world leader in commercial aircraft. In the face of competition, Boeing often faces a critical __________ decision: whether to develop a new generation of passenger aircraft. A. payback B. present value C. di

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33) Boeing Corporation is a world leader in commercial aircraft. In the face of competition, Boeing often faces a critical __________ decision: whether to develop a new generation of passenger ...

33) Boeing Corporation is a world leader in commercial aircraft. In the face of competition, Boeing often faces a critical __________ decision: whether to develop a new generation of passenger aircraft.
A. payback
B. present value
C. dividend
D. capital budgeting

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Fin 571 guide 1 33) Boeing Corporation is a world leader in commercial aircraft. In the face of competition, Boeing often faces a critical __________ decision: whether to develop a new generation of passenger aircraft.  A. payback  B. present value  C. di Fin 571 guide 1 33) Boeing Corporation is a world leader in commercial aircraft. In the face of competition, Boeing often faces a critical __________ decision: whether to develop a new generation of passenger aircraft. A. payback B. present value C. di Document Transcript

  • FIN/571 Guide 1 Click Here to Buy the Tutorial/Answers1) Which principle states that extraordinary returns are achievable with new ideas?A. The Principle of Valuable IdeasB. The Notional PrincipleC. The Principle of Risk-Return Trade-OffD. The Principle of Incremental Ideas2) Occurs when a "follower" receives the benefit of an expenditure made by a "leader" by imitating theleaders behavior.A. asymmetric informationB. The Principle of Comparative AdvantageC. put optionD. free-rider problem3) Occurs when inaccurate information can falsely exist.A. free-rider problemB. The Principle of Valuable IdeasC. adverse selectionD. moral hazard4) The annual report refers toA. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet,a statement of cash flows, and accompanying notes.B. the length of time remaining until an assetÂ’s maturity.
  • C. the extent to which something can be sold for cash quickly and easily without loss of value.D. a report issued annually by managers to primarily convey information about select working capitalratios.5) Remaining maturity refers to:A. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet,a statement of cash flows, and accompanying notes.B. a technical accounting term that encompasses the conventions, rules, and procedures necessary todefine accepted accounting practice at a particular time.C. the amount of time remaining until its maturity.D. the length of an assetÂ’s life when it is issued.6) Generally accepted accounting principles (GAAP) refers toA. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet,a statement of cash flows, and accompanying notes.B. a technical accounting term that encompasses the conventions, rules, and procedures necessary todefine accepted accounting practice at a particular time.C. the extent to which something can be sold for cash quickly and easily without loss of value.D. the length of an asset’s life when it is issued.7) The firm’s assets in the balance sheet refer to:A. the statement of a firms financial position at one point in time, including its assets and the claims onthose assets by creditors (liabilities) and owners (stockholders equity).B. the productive resources in the firm’s operations.C. the extent to which something can be sold for cash quickly and easily without loss of value.8) Original maturity refers to:A. the net amount (net book value) for something shown in quarterly accounting statements.B. a technical accounting term that encompasses the conventions, rules, and procedures necessary todefine accepted accounting practice at a particular time.C. the price for which something could be bought or sold in a reasonable length of time, where“reasonable length of time” is defined in terms of the itemÂ’s liquidity.D. the length of an asset’s life when it is issued.
  • 9) Book value (or Net book value) refers to:A. the net amount shown in the accounting statements.B. the statement of a firms financial position at one point in time, including its assets and the claims onthose assets by creditors (liabilities) and owners (stockholders equity).C. the price for which something could be bought or sold in a reasonable length of time, where“reasonable length of time” is defined in terms of the item’s liquidity.D. the length of an asset’s life when it is issued.10) Preferred stock payment obligations are typically __________.A. viewed like debt obligations.B. issued with a maturity date.C. valued as an annuity.D. none of these11) Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and thecurrent yield is 10%. Which of the following statements is true?A. The market value of the bond is less than $1,000B. The current yield was a lot less than 9% when the bond was first issuedC. The current yield was a lot greater than 9% when the bond was first issuedD. The market value of the bond is more than $1,00012) If the yield to maturity for a bond is less than the bonds coupon rate, then the market value of thebond is __________.A. cannot tellB. greater than the par value.C. less than the par value.D. equal to the par value.13) According to the CAPM, the expected return for a portfolio is determined by the portfolios.A. variance.B. beta.
  • C. standard deviation.D. none of these14) Certain countries have restrictions. In practice, U.S. investors have NOT invested very muchinternationally. Possible factors include __________.A. lower transaction costs.B. less political risk.C. costs of converting currencies.D. all of these15) Certain countries have restrictions. In practice, U.S. investors have NOT invested very muchinternationally. Possible factors include __________.A. lower transaction costs.B. expropriation risk.C. firm-specific risk.D. all of these16) One problem with using negative values for w1 (the proportion invested in the riskless asset) torepresent a borrowed amount is that the implied borrowing rate of interest is the same as __________.A. the nominal rate of interestB. the prime rate of interestC. the current rate of interestD. the lending rate of interest17) According to the Principle of Risk-Return Trade-Off, investors require a higher return to compensatefor __________.A. greater riskB. lack of diversificationC. diversificationD. less risk18) The Principle of __________ implies that the expected return for an asset equals its required return.
  • A. Risk-Return Trade-OffB. Capital Market EfficiencyC. SignalingD. Comparative Advantage19) Stony Products has a receivables turnover of ten times. What is Stony’s receivables collection period(RCP)?A. about 35.42 daysB. about 36.50 daysC. about 40.83 daysD. none of these20) Stony Products has a payables turnover of six times. What is Stonys payables deferral period (PDP)?A. about 30.42 daysB. about 56.50 daysC. about 60.83 daysD. none of these21) Stony Products has an inventory conversion period (ICP) of about 60.83 days. The receivablescollection period (RCP) is 36.50 days. The payables deferral period (PDP) is about 30.42 days. What isStonys cash conversion cycle (CCC)?A. about 67 daysB. about 66 daysC. about 69 daysD. about 68 days22) Bank term loans represent __________.A. long-term loans that looks like short-term debtB. loans for specified amounts that require borrowers to repay them according to specified schedulesC. the pledge of receivablesD. all of these
  • 23) __________ says to compare the benefits and costs of alternative uses and sources of money usingafter-tax APYs.A. The Signaling PrincipleB. The Principle of Time Value of MoneyC. The Options PrincipleD. The Principle of Incremental Benefits24) Firms make short-term financial decisions just about every day solving such questions as__________.A. Where should we borrow?B. Where should we invest our cash?C. How much liquidity should we have?D. all of these25) Which (if any) of the following statements is false?A. When invoices are numerous, a firm may use statement billing instead of invoice billing.B. With statement billing, all of the sales for a period such as a month (for which a customer receivesinvoices, too) are collected into a single statement and sent to the customer as one bill.C. CIA (cash in advance) refers to when the shipper collects the payment (on behalf of the seller) upondelivery.D. none of these26) Credit-policy decisions involve all aspects of receivables management. The decision does NOTinclude which of the following?A. the choice of credit termsB. setting evaluation methods and credit standardsC. controlling and administering the firm’s credit functionsD. monitoring receivables and avoiding actions for slow payment27) Which of the following statements is (are) true?A. The "dating 120" or the "60 extra" mean that the clock does not start until 120 or 60 days after theinvoice date.
  • B. Prox or proximate refers to the next month.C. Invoices with "10th prox" must be paid by the 10th of the next month.D. all of these28) An all-equity-financed firm would __________.A. pay corporate income taxes because it would have interest expense.B. not pay any income taxes because interest would exactly offset its taxable income.C. pay corporate income taxes if its taxable income is positive.D. not pay corporate income taxes because it would have no interest expense.29) Whenever a firm splits itself into separate units, with each unit having limited liability with respectto its financing, the capital structure of each unit becomes __________.A. an irrelevant consideration for a cost of capital.B. the relevant consideration for a cost of capital.C. important only if the firm faces financial distress.D. none of these30) A profitable firm would __________.A. pay corporate income taxes because it would have interest expense.B. pay corporate income taxes because it would not have interest expense.C. pay corporate income taxes if it had a positive taxable income.D. none of these31) The capital budgeting process can be broken down into five steps. These steps include which of thefollowing?A. Generate ideas for capital budgeting projectsB. Prepare proposalsC. Review existing projects and facilitiesD. all of these32) Ideas for capital budgeting projects come from all levels within an organization. The bottom upprocess results in ideas percolating through the organization.
  • A. upwardB. downwardC. any wayD. sideways33) Boeing Corporation is a world leader in commercial aircraft. In the face of competition, Boeing oftenfaces a critical __________ decision: whether to develop a new generation of passenger aircraft.A. paybackB. present valueC. dividendD. capital budgeting34) Net present value ( NPV) is the difference between __________.A. cash flows before taxes and cash flows after taxesB. what a capital budgeting project produces and what it is worth (its market value)C. what a capital budgeting project costs and what it is worth (its market value)D. what a capital budgeting project produces and what it is pays35) Whenever projects are both independent and conventional, then the IRR and NPV methods agree.Which of the following statements is true?A. A mutually exclusive project is one that can be chosen independently of other projects.B. When undertaking one project prevents investing in another project, and vice versa, the projects aresaid to have a positive payback.C. A conventional project is a project with an initial cash outflow that is followed by one or moreexpected future cash inflows.D. all of these36) In practice, the __________ rule is preferred.A. PaybackB. NPVC. PI
  • D. IRR37) Studies show systematic differences in capital structures across industries. These are due mostly todifferences in __________.A. hiring and firing practices.B. the availability of tax shelter provided by things other than debt, such as accelerated depreciation,investment tax credit, and operating tax loss carryforwards.C. what the arbitrage pricing theory tells us.D. none of these38) Studies show systematic differences in capital structures across industries. These are due mostly todifferences in __________.A. management’s attitude toward what other industries are doing.B. the firm’s inventory turnover ratio.C. accounting practices.D. the ability of assets to support borrowing.39) A firm cannot simply adopt the industry average debt ratio, because differences exist among firms inany particular industry with respect to __________.A. tax position.B. size.C. competitive position.D. all of these40) There can be a variety of motives for stock repurchases including __________.A. all of theseB. a buyback of undervalued stock.C. a decrease in leverage.D. a decrease in anticipated earnings.41) There can be a variety of motives for stock repurchases including __________.A. a buyback of overvalued stock.
  • B. an increase in leverage.C. a decrease in anticipated earnings.D. all of these42) Some countries have __________ in which shareholders returns are not fully taxed twice.A. an imputation tax systemB. a split tax systemC. a two-tier tax systemD. none of these43) Conditional sales contracts __________.A. are seldom issued to finance the purchase of aircraftB. are similar to equipment trust certificatesC. enable the borrower to obtain title to the assets only before it fully repays the debtD. all of these44) The Time Value of Money Principle says __________.A. that announcing the firms decision to issue securities conveys information about the firmB. to use discounted cash flow analysis to compare the costs and benefits of financing decisions, such asalternative securities to sell, lease versus borrow and buy, and bond refundingC. to look for the most advantageous ways to finance the firm, such as the lowest-cost debt alternativeD. to set a price and other terms that investors will find acceptable when issuing securities45) Stated maturity is __________.A. usually a fixed rate, but it can be a variable rate that’s adjusted according to a specified formulaB. the date the borrower must repay the money it borrowedC. the amount the borrower must repay46) __________ says to calculate the net advantage of leasing based on the incremental after-taxbenefits that leasing will provide.A. The Capital Market Efficiency
  • B. The Options PrincipleC. The Principle of Incremental BenefitsD. The Principle of Comparative Advantage47) __________ says to look for opportunities to develop asset-based financing arrangements that offernew positive-NPV financing mechanisms.A. The Time Value of Money PrincipleB. The Principle of Valuable IdeasC. The Principle of Comparative AdvantageD. The Principle of Self-Interested Behavior48) The Principle of Self-Interested Behavior says __________.A. to look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it.B. to calculate the net advantage of leasing based on the incremental after-tax benefits that leasing willprovide.C. that leasing transfers the tax benefits of ownership from the lessee to the lessor.D. to use discounted cash flow analysis to compare the costs and benefits of leasing, relative to thealternative of borrowing and buying.49) The wholesale price for Captain John’s is $3.00 per loaf. One million loaves will be sold in the nextyear. What is the contribution margin?A. $3.00B. $3,000,000 minus fixed costsC. cannot tellD. $3,000,00050) The wholesale price for Captain John’s is $0.612 per loaf, and the variable cost of production is$0.387 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 4.5million loaves in the next five years. What additional revenues minus expenses will be generated fromexpansion?A. $912,500B. $1,000,500
  • C. $1,102,000D. $1,012,50051) The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of production is $0.50per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 5.0 millionloaves in the next year. What additional revenues minus expenses will be generated from expansion?A. $25,000B. $250,000C. $550,000D. none of these52) Which of the following statements is true?A. Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing fromoutside sources.B. Hard capital rationing refers to the rationing imposed internally by the firm.C. A post audit is a set of procedures for evaluating a capital budgeting decision after the fact.D. all of these53) Pursuing valuable ideas is the best way __________.A. to achieve extraordinary returns.B. to get yourself in trouble.C. to avoid risk.D. to restrain your spending.54) Due to asymmetric information, the market fears that a firm issuing securities will do so when thestock is ___________.A. caught up in a bear market.B. undervalued.C. overvalued.D. being sold by insiders.
  • 55) __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows ofalternative decisions.A. The Principle of Incremental BenefitsB. The Signaling PrincipleC. The Time Value of Money PrincipleD. The Principle of Risk-Return Trade-Off56) __________ says to carefully evaluate and monitor the financial plan’s impact on the firm and itsstakeholders.A. The Principle of Capital Market EfficiencyB. The Principle of Risk-Return Trade-OffC. The Principle of DiversificationD. The Principle of Self-Interested Behavior57) ___________ says to use both bottom-up and top-down processes to increase the chance ofuncovering valuable ideas.A. The Principle of Two-Sided TransactionsB. The Behavioral PrincipleC. The Principle of Comparative AdvantageD. The Principle of Valuable Ideas