1, When firms use multiple sources of capital, they need to calcul.docx

1, When firms use multiple sources of capital, they need to
calculate the appropriate discount rate for valuing their firm's
cash flows as__________.
·
they apply to each asset as they are purchased with their
respective forms of debt or equity
·
a sum of the capital components costs
·
a simple average of the capital components costs
·
a weighted average of the capital components costs
2. Which of these is used as a measure of the total amount of
available cash flow from a project?
·
Free cash flow
·
Investment in operating capital
·
Operating cash flow
·
Sunk cash flow
3.
Which financial statement shows the total revenues that a firm
earns and the total expenses the firm incurs to generate those
revenues over a specific period of time — generally one year?
·
Balance sheet
·
Statement of cash flows
·
Statement of retained earnings

·
Income statement
4.
Which financial statement reports the amounts of cash that the
firm generated and distributed during a particular time period?
·
statement of retained earnings
·
·
Balance sheet
·
Income statement
5.
Which of these is the process of estimating expected future cash
flows of a project using only the relevant parts of the balance
sheet and income statements?
·
Substitutionary analysis
·
Incremental cash flows
·
Pro forma analysis
·
Cash flow analysis
6.
Which of the following terms means that during periods when
interest rates change substantially, bondholders experience
distinct gains and losses in their bond investments?
·
Liquidity rate risk
·
Credit quality risk

·
Reinvestment rate risk
·
Interest rate risk
7.
The Rule of 72 is a simple mathematical approximation
for__________.
the number of years required to double an investment
·
the payments required to double an investment
·
the present value required to double an investment
·
the number of years required to double an investment
·
the future value required to double an investment
8. Which of these ratios show the combined effects of liquidity,
asset management, and debt management on the overall
operation results of the firm?
·
Financial
·
Liquidity
·
Profitability
·
Coverage
9.
Financial plans include which of the following?
·
Schedule of Sales, Expenses, and Capital Expenditure
·
Pro forma Income Statement, Balance Sheet

·
Short Term and Long Term Plan
·
All of the above
10.
Which of these does NOT perform vital functions to securities
markets of all sorts by channeling funds from those with surplus
funds to those with shortages of funds?
·
Insurance companies
·
Commercial banks
·
Secondary markets
·
Mutual funds
11.
Which of the following is a true statement?
·
If interest rates fall, all bonds will enjoy rising values.
·
If interest rates fall, corporate bonds will have decreasing
values.
·
If interest rates fall, U.S. Treasury bonds will have decreasing
values.
·
If interest rates fall, no bonds will enjoy rising values.
12.
We commonly measure the risk-return relationship using which
of the following?
·
Correlation coefficient

·
Coefficient of variation
·
Standard deviation
·
Expected returns
13. Which of these provide a forum in which demanders of
funds raise funds by issuing new financial instruments, such as
stocks and bonds?
·
Investment banks
·
Money markets
·
Secondary markets
·
Primary markets
14. Suppose that Model Nails, Inc.'s capital structure features
60 percent equity, 40 percent debt, and that its before-tax cost
of debt is 6 percent, while its cost of equity is 10 percent. If the
appropriate weighted average tax rate is 28 percent, what will
be Model Nails' WACC?
·
8.00 percent
·
7.73 percent
·
8.40 percent
·
16.00 percent
15
Five years ago, Jane invested $5,000 and locked in an 8 percent
annual interest rate for 25 years (ending 20 years from now).

James can make a 20-year investment today and lock in a 10
percent interest rate. How much money should he invest now in
order to have the same amount of money in 20 years as Jane?
·
$3,160.43
·
$5,089.91
·
$7,346.64
·
$3,464.11
16
The overall goal of the financial manager is to__________.
·
maximize shareholder wealth
·
maximize earnings per share
·
minimize total costs
·
maximize net income
17
Which financial statement reports a firm's assets, liabilities, and
equity at a particular point in time?
·
Income statement
·
·
Statement of retained earnings
·
Balance sheet
18

What are reasons for the firm to go abroad?
·
Access to raw materials
·
Lower production cost
·
Diversification
19
We call the process of earning interest on both the original
deposit and on the earlier interest payments:
·
computing.
·
compounding.
·
discounting.
·
multiplying.
20
Which of the following can create ethical dilemmas between
corporate managers and stockholders?
·
Board of directors
·
Venture Capitalist
·
Auditors
·
Agency relationship
21
What are the tools available for the manager in financial
planning?
·
Delaying disbursement of cash and cash management

·
Delaying disbursement of cash, reducing collection period, cash
management, and Increasing inventory turnover
·
Increasing inventory turnover and reducing collection period
·
Reducing collection period and delaying disbursement of cash
22
You are trying to pick the least-expensive machine for your
company. You have two choices: machine A, which will cost
$50,000 to purchase and which will have OCF of -$3,500
annually throughout the machine's expected life of three years;
and machine B, which will cost $75,000 to purchase and which
will have OCF of -$4,900 annually throughout that machine's
four-year life. Both machines will be worthless at the end of
their life. If you intend to replace whichever type of machine
you choose with the same thing when its life runs out, again and
again out into the foreseeable future, and if your business has a
cost of capital of 14 percent, which one should you choose?
·
Machine B
·
Neither machine A nor B
·
Both machines A and B
·
Machine A
23
Will's Wheels, Inc. reported a debt-to-equity ratio of 0.65 times
at the end of 2013. If the firm's total debt at year-end was $5
million, how much equity does Will's Wheels have?
·
$0.65 million
·

$7.69 million
·
$5 million
·
$3.25 million
24
Which of these statements is true regarding divisional WACC?
·
Using a simple firmwide WACC to evaluate new projects would
give an unfair advantage to projects that present more risk than
the firm's average beta.
·
Using a divisional WACC versus a WACC for the firm's current
operations will result in quite a few incorrect decisions.
·
Using a simple firmwide WACC to evaluate new projects would
give an unfair advantage to projects that present less risk than
the firm's average beta.
·
Using a firmwide WACC to evaluate new projects would have
no impact on projects that present less risk than the firm's
average beta.
25
We can estimate a stock's value by__________.
·
discounting the future dividends and future stock price
appreciation
·
using the book value of the total assets divided by the number
of shares outstanding
·
using the book value of the total stockholder equity section
·
compounding the past dividends and past stock price

appreciation
26
What's the current yield of a 6 percent coupon corporate bond
quoted at a price of 101.70?
·
6.0 percent
·
5.9 percent
·
6.1 percent
·
10.2 percent
27
A firm is expected to pay a dividend of $2.00 next year and
$2.14 the following year. Financial analysts believe the stock
will be at their target price of $75.00 in two years. Compute the
value of this stock with a required return of 10 percent.
·
$66.67
·
$65.40
·
$79.14
·
$65.57
28
The top part of Mars, Inc.'s 2013 balance sheet is listed as
follows (in millions of dollars).
·
4.2, 1.0, 0.2

·
0.1111, 0.5556, 0.2
·
2.3333, 0.5556, 0.1111
·
10.5, 6.0, 1.0
29
As new capital budgeting projects arise, we must
estimate__________.
·
the float costs for financing the project
·
the cost of the stock being sold for the specific project
·
the cost of the loan for the specific project
·
when such projects will require cash flows
30
Which of these is the term for portfolios with the highest return
possible for each risk level?
·
Total portfolios
·
Efficient portfolios
·
Optimal portfolios
·
Modern portfolios
q

1, When firms use multiple sources of capital, they need to calcul.docx

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