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1. FINC600 Full Course/FINC 600
Click Link Below To Buy:
https://hwaid.com/shop/finc600-full-coursefinc-600/
Contact Us:
hwaidservices@gmail.com
FINC600 Full Course
Corporate Finance
FINC600 Week 1 Assignment – Homework Problems
FINC600 Week 2 Assignment – Homework Problems
FINC600 Week 3 Assignment – Homework Problems
FINC600 Week 4 Assignment – Homework Problems
FINC600 Week 5 Assignment – Homework Problems
FINC600 Week 6 Assignment – Homework Problems
FINC600 Week 7 Assignment – Homework Problems
FINC600 Week 1 Practice Quiz
FINC600 Week 2 Practice Quiz
FINC600 Week 3 Practice Quiz
FINC600 Week 4 Practice Quiz
FINC600 Week 5 Practice Quiz
FINC600 Week 6 Practice Quiz
FINC600 Week 7 Practice Quiz
FINC600 Week 8 Practice Quiz
FINC600 Midterm Quiz
FINC600 Week 1 Assignment – Homework Problems
AssignmentInstructions
Complete the following problems in MicrosoftExcel. Your work mustbe completed in the attached template.
Chapter 1: 1-6, 1-8
Chapter 2: 2-9, 2-12Chapter 3: 3-3, 3-4
Computations mustbe solved using Excel. Show all your work to earn partial credit. Essayquestions require
references.Submitto Assignments bymidnightET, Day 7 (Sunday).
1-6
In mostlarge corporations,ownership and managementare separated.Whatare the main implications ofthis
separation?
1-8

2. We can imagine the financial manager doing several things on behalfofthe firm’s stockholders.For example,the
manager might:
a. Make shareholders as wealthyas possible byinvesting in real assets.
b. Modify the firm’s investmentplan to help shareholders achieve a particular time pattern of consumption.
c. Choose high- or low-risk assets to match shareholders’ risk preferences.
d. Help balance shareholders’ checkbooks.
But in well-functioning capital markets,shareholders will vote for only one of these goals.Which one? Why?
2-9
A. The costof an automobile is $10,000.Ifthe interestrate is 5%, how much would you have to set aside now to
provide this sum in five years?
B. You have to pay $12,000 a year in school fees atthe end of each of the next six years. If the interestrate is 8%,
how much do you set aside today to cover these bills?
C. You have invested $60,476 at 8%. After paying the above school fees,how much would you remain atthe end of
six years?
2-12
What is the PV of $100 received in:
A. Year 10 (at a discountrate of 1%)
B. Year 10 (at a discountrate of 13%)
C. Year 15 (at a discountrate of 25%)
D. Each of years 1 through 3 (at a discountrate of 12%)?
3-3
In February 2009 Treasury6s of 2026 offered a semiannuallycompounded yield of3.5965%.Recognizing that
coupons are paid semiannually,calculate the bond’s price.
3-4
Here are the prices of three bonds with 10-year maturities:
Bond Coupon (%) Price (%)
2 81.62
4 98.39
8 133.42
If coupons are paid annually,which bond offered the highestyield to maturity?
Which had the lowest?
Which bonds had the longestand shortestdurations?
FINC600 Week 1 Practice Quiz
Corporate Finance
Week 1 Practice Quiz
Question 1 of 15
As a legal entity a corporation can perform the following functions except:I) borrow money; II) lend money; III) sue
and be sued;IV) vote
A.I and II only
B.I, II, and III only
C.IV only
D.I, II, III and IV

3. Question 2 of 15
A firm’s investmentdecision is also called the:
A. Financing decision
B. Liquiditydecision
C. Capital budgeting decision
D. None of the above
Question 3 of 15
The following are importantfunctions offinancial markets:I) Source of financing;II) Provide liquidity; III) Reduce risk;
IV) Source of information
A.I only
B.I and II only
C.I, II, III, and IV
D.IV only
Question 4 of 15
The mixture of debt and equity, used to finance a corporation is also known as:
A. Capital budgeting
B. Capital structure
C. Investing
D. Treasury
Question 5 of 15
The following are some ofthe actions shareholders can take if the corporation is notperforming well:
A. Replace the board of directors in an election.
B. Force the board of directors to change the managementteam.
C. Sell their shares ofstock in the corporation.
D. Any of the above
Question 6 of 15
Major disadvantages ofthe Sarbanes-Oxley Act of 2002 (SOX) are the following except:
A. good investor protection
B. increase in compliance costs
C. that it constrains managers’ abilityto run the firm
D. that it may discourage developmentofhuman capital in the firm
Question 7 of 15
PresentValue is defined as:
A. Future cash flows discounted to the presentat an appropriate discountrate
B. Inverse of future cash flows
C. Presentcash flow compounded into the future
Question 8 of 15
PresentValue of $100,000 that is,expected, to be received at the end of one year at a discountrate of 25% per year
is:
• $80,000
B. $125,000
C. $100,000
D. None of the above
Feedback:PV = (100,000)/(1 + 0.25) = 80,000
Question 9 of 15
If the presentvalue of a cash flow generated by an initial investmentof $200,000 is $250,000,whatis the NPV of the
project?
• $250,000

4. B. $50,000
C. $200,000
D. None of the above
Feedback:NPV = -200,000 + 250,000 = 50,000
Question 10 of 15
According to the net presentvalue rule,an investmentin a projectshould be made ifthe:
A.Net presentvalue is greater than the costof investment
B.Net presentvalue is greater than the presentvalue of cash flows
C.Net presentvalue is positive
D.Net presentvalue is negative
Question 11 of 15
An annuity is defined as
A. Equal cash flows atequal intervals of time for a specified period oftime
B. Equal cash flows atequal intervals of time forever
C. Unequal cash flows atequal intervals of time forever
D. None of the above
Question 12 of 15
The conceptof compound interestis mostappropriatelydescribed as:
A. Interestearned on an investment
B. The total amountofinterestearned over the life of an investment
C. Interest earned on interest
D. None of the above
Question 13 of 15
The following entities issue bonds to raise long-term loans except:
A. The federal government
B. State and local governments
C. Companies
D. Individuals
Question 14 of 15
A 5-year treasurybond with a coupon rate of 8% has a face value of $1000.What is the semi-annual interest
payment? Annual interestpayment= 1000(0.08) = $80; Semi-annual payment= 80/2 = $40
A. $80
B. $40
C. $100
D. None of the above
Feedback:Annual interestpayment= 1000(0.08) = $80;
Semi-annual payment= 80/2 = $40
Question 15 of 15
A bond with duration of 10 years has yield to maturity of 10%. This bond’s volatilityis:
A.9.09%
B.6.8%
C.14.6%
D.6.0%
FINC600 Week 2 Assignment – Homework Problems
Problem 4-10

5. Under what conditions does r,a stock’s marketcapitalization rate,equal its earnings¬price ratio EPS1/P0?
Problem 4-12
What is meantby the “horizon value” of a business? How can itbe estimated?
Problem 5-9
Respond to the following comments:
a. “I like the IRR rule. I can use it to rank projects withouthaving to specify a discountrate.”
b. “I like the payback rule. As long as the minimum payback period is short,the rule makes sure thatthe company
takes no borderline projects.That reduces risk.”
Problem 5-16
Some people believe firmly, even passionately,that ranking projects on IRR is OK if each project’s cash flows can be
reinvested at the project’s IRR.They also saythat the NPV rule “assumes thatcash flows are reinvested at the
opportunity costof capital.” Think carefully aboutthese statements.Are they true? Are they helpful?
Problem 6-2
Mr. Art Deco will be paid $100,000 one year hence.This is a nominal flow,which he discounts atan 8% nominal
discountrate:
PV = 100,000/1.08 = $92,593
The inflation rate is 4%.
Calculate the PV of Mr. Deco’s paymentusing the equivalentreal cash flow and real discountrate.(You should get
exactly the same answer as he did.)
Problem 6-13
Each of the following statements is true.Explain why they are consistent.
a. When a companyintroduces a new product, or expands production ofan existing product, investmentin net
working capital is usuallyan importantcash outflow.
b. Forecasting changes in networking capital is not necessaryif the timing of all cash inflows and outflows i s carefully
specified.
FINC600 Week 2 Practice Quiz
Corporate Finance
Week 2 Practice Quiz
Question 1 of 15
If the Wall Street Journal Quotation for a companyhas the following values close:55.14;Net chg: = + 1.04; then the
closing price for the stock for the previous trading day was?
A. $56.18
B. $54.10
C. $55.66
D. None of the above.
Feedback:Previous closing = today’s closing netchg. = 55.14 – 1.04 = $54.10
Question 2 of 15
The value of a common stock today depends on:
A. Number ofshares outstanding and the number ofshareholders
B. The expected future dividends and the discountrate
C. the Wall Street analysts

6. Question 3 of 15
CompanyX has a P/E ratio of 10 and a stock price of $50 per share.Calculate earnings per share ofthe company.
A. $6 per share
B. $10 per share
C. $0.20 per share
D. $5 per share
Question 4 of 15
Which of the following stocks is/are a growth stock(s)?
A. Unilever
B. Cummins,Inc
C. Starbucks
D. All of the above are growth stocks
Question 5 of 15
Universal Air is a no growth firm and has two million shares outstanding.Itis expected to earn a constant20 million
per year on its assets.If all earnings are paid outas dividends and the costof capital is 10%, calculate the current
price per share for the stock.
A. $200
B. $150
C. $100
D. $50
Question 6 of 15
Which of the following investmentrules does notuse the time value of the money concept?
A. Net presentvalue
B. Internal rate of return
C. The payback period
D. All of the above use the time value concept
Question 7 of 15
The following are measures used byfirms when making capital budgeting decisions except:
A. Payback period
B. Internal rate of return
C. P/E ratio
D. Net presentvalue
Question 8 of 15
Which of the following investmentrules has value adding-up property?
A. The payback period method
B.Net presentvalue method
C. The book rate of return method
D. The internal rate of return method
Question 9 of 15
Internal rate of return (IRR) method is also called:
A. Discounted payback period method
B. Discounted cash-flow (DCF) rate of return method
C. Modified internal rate of return (MIRR) method
D. None of the above
Question 10 of 15
Profitability index is the ratio of:
A. Future value of cash flows to investment
B. Net presentvalue of cash flows to investment

7. C. Net presentvalue of cash flows to IRR
D. Presentvalue of cash flows to IRR
Question 11 of 15
When a firm has the opportunity to add a project that will utilize excess factory capacity (that is currently not being
used),which costs should be used to determine ifthe added projectshould be undertaken?
A. Opportunity cost
B. Sunk cost
C. Incremental costs
D. None of the above
Question 12 of 15
The costof a resource thatmay be relevant to an investmentdecision even when no cash changes hand is called a
(an):
A. Sunk cost
B. Opportunity cost
C. Working capital
D. None of the above
Question 13 of 15
Net Working Capital should be considered in projectcash flows because:
A. Firms mustinvestcash in short-term assets to produce finished goods
B. They are sunk costs
C. Firms need positive NPV projects for investment
D. None of the above
Question 14 of 15
If the discountrate is stated in nominal terms,then in order to calculate the NPV in a consistentmanner requires that
project:
I) cash flows be estimated in nominal terms
II) cash flows be estimated in real terms
III) accounting income be used
Correct A.I only
B. II only
C. III only
D. None of the above
Question 15 of 15
For example,in the case of an electric car project, which of the following cash flows should be treated as incremental
flows when deciding whether to go ahead with the project?
A.The cost of research and developmentundertaken for developing the electric car in the pastthree years
B.The annual depreciation charge
Correct C.Tax savings resulting from the depreciation charges
D.Dividend payments
finc600 Week 3 Assignment – Homework Problems
Problem 7-2
The following table shows the nominal returns on U.S.Stocks and the rate of inflation:
Year Nominal Return (%) Inflation (%)
2004 12.5 3.3
2005 6.4 3.4
2006 15.8 2.5
2007 5.6 4.1
2008 -37.2 0.1

8. a) What was the standard deviation of the marketreturns?
b) Calculate the average real return.
m
Problem 7-11
“Each of the following statements is dangerous or misleading.Explain why.
a. A long-term United States governmentbond is always absolutelysafe.
b. All investors should prefer stocks to bonds because stocks offer higher long-run rates ofreturn.
c. The bestpractical forecastof future rates of return on the stock marketis a 5- or 10-year average of historical
returns.
”
Problem 8-6
Suppose thatthe Treasury bill rate were 6% rather than 4%. Assume thatthe expected return on the marketstays at
10%. Use the betas in Table 8.2 (p. 193) – also provided below.
“a. Calculate the expected return from Dell.
b. Find the highestexpected return that is offered by one of these stocks.
c. Find the lowestexpected return that is offered by one of these stocks.
d. Would Ford offer a higher or lower expected return if the interestrate were 6% rather than 4%? Ass ume thatthe
expected marketreturn stays at 10%.
e. Would Exxon Mobil offer a higher or lower expected return if the interestrate were 8%?
”
Problem 8-18
“Some true or false questions aboutthe APT:
a. The APT factors cannot reflect diversifiable risks.
b. The marketrate of return cannot be an APT factor.
c. There is no theory that specificallyidentifies the APT factors. d. The APT model could be true but not very useful,
for example,if the relevant factors change unpredictably.
Respond to each question – true or false – and why. ”
FINC600 Week 3 Practice Quiz
Corporate Finance
Week 3 Practice Quiz
Part 1 of 1 – 15.0/ 15.0 Points
Question 1 of 15 1.0/ 1.0 Points
Which of the following portfolios have the leastrisk?
A.A portfolio of Treasury bills
B.A portfolio of long-term United States Governmentbonds
C.Portfolio of U.S. common stocks ofsmall firms
D.None of the above
Question 2 of 15 1.0/ 1.0 Points
If the average annual rate of return for common stocks is 11.7%,and for treasurybills it is 4.0%, what is the market
risk premium?
A.15.8%
B.4.1%
C.7.7%
D.None of the above
Question 3 of 15 1.0/ 1.0 Points
Spill Oil Company’s stocks had -8%,11% and 24% rates of return during the lastthree years respectively; calculate
the average rate of return for the stock.

9. A.8% per year
B.9% per year
C.11% per year
D.None of the above
Question 4 of 15 1.0/ 1.0 Points
Given the following data:risk-free rate = 4%, average risk premium = 7.7%.Calculate the required rate of return:
A.5.6%
B.7.6%
C.11.7%
D.None of the given answers
Question 5 of 15 1.0/ 1.0 Points
The unique risk is also called the:
A.Unsystematic risk
B.Diversifiable risk
C.Firm specific risk
D.All of the above
Question 6 of 15 1.0/ 1.0 Points
Market risk is also called:I) systematic risk,II) undiversifiable risk,III) firm specific risk.
A.I only
B.II only
C.III only
D.I and II only
Question 7 of 15 1.0/ 1.0 Points
Stock A has an expected return of 10% per year and stock B has an expected return of 20%.If 40% of the funds are
invested in stock A, and the rest in stock B, what is the expected return on the portfolio of stock A and stock B?
A.10%
B.20%
C.16%
D.None of the above
Question 8 of 15 1.0/ 1.0 Points
If the correlation coefficientbetween stock C and stock D is +1.0% and the standard deviation of return for stock C is
15% and that for stock D is 30%, calculate the covariance between stock C and stock D.
A.+45
B.-450
C.+450
D.None of the above
Question 9 of 15 1.0/ 1.0 Points
The beta of marketportfolio is:
A.+ 1.0
B.+0.5
C.0
D.-1.0

10. Question 10 of 15 1.0/ 1.0 Points
The distribution ofreturns,measured over a shortinterval of time,like daily returns,can be approximated by:
A.Normal distribution
B.Lognormal distribution
C.Binomial distribution
D.none of the above
Question 11 of 15 1.0/ 1.0 Points
Florida Company(FC) and Minnesota Company(MC) are both service companies.Their historical return for the past
three years are: FC: – 5%,15%,20%; MC: 8%, 8%, 20%.If FC and MC are combined in a portfolio with 50% of the
funds invested in each, calculate the expected return on the portfolio.
A.12%
B.10%
C.11%
D.None of the above.
Question 12 of 15 1.0/ 1.0 Points
Suppose you invest equal amounts in a portfolio with an expected return of 16% and a standard deviation of returns
of 20% and a risk-free assetwith an interestrate of 4%; calculate the expected return on the resulting portfolio:
A.10%
B.4%
C.12%
D.none of the above
Question 13 of 15 1.0/ 1.0 Points
Suppose you invest equal amounts in a portfolio with an expected return of 16% and a standard deviation of returns
of 20% and a risk-free assetwith an interestrate of 4%; calculate the standard deviation of the returns on the
resulting portfolio:
A.8%
B.10%
C.20%
D.none of the above
Question 14 of 15 1.0/ 1.0 Points
The correlation measures the:
A.Rate of movements ofthe return of individual stocks
B.Direction of movementof the return of individual stocks
C.Direction of movementbetween the returns of two stocks
D.Stock marketvolatility
Question 15 of 15 1.0/ 1.0 Points
The security marketline (SML) is the graph of:
A.Expected rate on investment(Y-axis) vs. variance of return
B.Expected return on investmentvs. standard deviation of return
C.Expected rate of return on investmentvs. beta
D.A and B
Part 1 of 1 – Week 4 REQUIRED Quiz 93.5/ 100.0 Points

11. Question 1 of 25
4.0/ 4.0 Points
The conceptof compound interestis mostappropriatelydescribed as:
A.Interest earned on an investment
B.The total amountof interestearned over the life of an investment
Correct C.Interestearned on interest
D.None of the above
Question 2 of 25
4.0/ 4.0 Points
Which of the following investmentrules does notuse the time value of the money concept?
A.Net presentvalue
B.Internal rate of return
Correct C.The payback period
D.All of the above use the time value concept
Question 3 of 25
4.0/ 4.0 Points
The unique risk is also called the:
A.Unsystematic risk
B.Diversifiable risk
C.Firm specific risk
Correct D.All of the above
Question 4 of 25
2.0/ 4.0 Points
What are some ofthe importantpoints to remember while estimating the cash flows ofa project?
The mostimportantpoints are
1) They are estimates.So there can be deviations
2) Some huge loss maycompletelychange the return from product.
3) Other risks like marketrisks,reinvestmentrisk etc. may affect the cash flow pattern
Question 5 of 25
4.0/ 4.0 Points

12. A bond with duration of 10 years has yield to maturity of 10%. This bond’s volatilityis:
Correct A.9.09%
B.6.8%
C.14.6%
D.6.0%
Question 6 of 25
4.0/ 4.0 Points
Major disadvantages ofthe Sarbanes-Oxley Act of 2002 (SOX) are the following except:
Correct A.good investor protection
B.increase in compliance costs
C.that it constrains managers’ abilityto run the firm
D.that it may discourage developmentofhuman capital in the firm
Question 7 of 25
4.0/ 4.0 Points
According to the net presentvalue rule,an investmentin a projectshould be made ifthe:
A.Net presentvalue is greater than the costof investment
B.Net presentvalue is greater than the presentvalue of cash flows
Correct C.Net presentvalue is positive
D.Net presentvalue is negative
Question 8 of 25
0.0/ 4.0 Points
If the Wall Street Journal Quotation for a companyhas the following values close:55.14;Net chg: = + 1.04; then the
closing price for the stock for the previous trading day was?
A.$56.18
B.$54.10
Incorrect C.$55.66
D.None of the above.
Question 9 of 25
4.0/ 4.0 Points
For example,in the case of an electric car project, which of the following cash flows should be treated as incremental
flows when deciding whether to go ahead with the project?
A.The cost of research and developmentundertaken for developing the electric car in the pastthree years
B.The annual depreciation charge
Correct C.Tax savings resulting from the depreciation charges
D.Dividend payments

13. Question 10 of 25
4.0/ 4.0 Points
The following are some ofthe actions shareholders can take if the corporation is notperforming well:
A.Replace the board of directors in an election.
B.Force the board of directors to change the managementteam.
C.Sell their shares ofstock in the corporation.
Correct D.Any of the above
Question 11 of 25
4.0/ 4.0 Points
The mixture of debt and equity, used to finance a corporation is also known as:
A.Capital budgeting
Correct B.Capital structure
C.Investing
D.Treasury
Question 12 of 25
3.5/ 4.0 Points
Discuss the general principle in the valuation of a common stock.
Question 13 of 25
4.0/ 4.0 Points
The managers ofa firm can maximize stockholder wealth by:
Correct A.Taking all projects with positive NPVs
B.Taking all projects with NPVs greater than the cost of investment
C.Taking all projects with NPVs greater than presentvalue of cash flow
D.All of the above
Answer Key: A
Question 14 of 25
4.0/ 4.0 Points
Florida Company(FC) and Minnesota Company(MC) are both service companies.Their historical return for the past
three years are: FC: – 5%,15%,20%; MC: 8%, 8%, 20%.If FC and MC are combined in a portfolio with 50% of the
funds invested in each, calculate the expected return on the portfolio.
A.12%
B.10%
Correct C.11%
D.None of the above.

14. Question 15 of 25
4.0/ 4.0 Points
The marketvalue of XYZ Corporation’s common stock is 40 million and the marketvalue of the risk-free debt is 60
million.The beta of the company’s common stock is 0.8,and the expected market risk premium is 10%.If the
Treasury bill rate is 6%, whatis the firm’s costof capital? (Assume no taxes.)
Correct A.9.2%
B.14%
C.8.1%
D.None of the above
Question 16 of 25
4.0/ 4.0 Points
The following are importantfunctions offinancial markets:I) Source of financing;II) Provide liquidity; III) Reduce risk;
IV) Source of information
A.I only
B.I and II only
Correct C.I, II, III, and IV
D.IV only
Question 17 of 25
4.0/ 4.0 Points
Which of the following portfolios have the leastrisk?
Correct A.A portfolio of Treasurybills
B.A portfolio of long-term United States Governmentbonds
C.Portfolio of U.S. common stocks ofsmall firms
D.None of the above
Question 18 of 25
4.0/ 4.0 Points
PresentValue of $100,000 that is,expected, to be received at the end of one year at a discountrate of 25% per year
is:
Correct A.$80,000
B.$125,000
C.$100,000
D.None of the above
Question 19 of 25
4.0/ 4.0 Points
Discuss some ofthe disadvantages ofthe payback rule.

15. The disadvantages are thatit does not take the time value of moneyinto accountand also does notuse all the cash
flow. It has limited applications such as small projects
Feedback:The disadvantages are thatit does nottake the time value of money into account and also does notuse
all the cash flow. It has limited applications such as small projects.
Question 20 of 25
4.0/ 4.0 Points
What is the relationship between interestrates and bond prices?
Question 21 of 25
4.0/ 4.0 Points
Spill Oil Company’s stocks had -8%,11% and 24% rates of return during the lastthree years respectively; calculate
the average rate of return for the stock.
A.8% per year
Correct B.9% per year
C.11% per year
D.None of the above
Question 22 of 25
4.0/ 4.0 Points
Which of the following statements regarding the discounted payback period rule is true?
Correct A.The discounted payback rule uses the time value of moneyconcept.
B.The discounted payback rule is better than the NPV rule.
C.The discounted payback rule considers all cash flows.
D.The discounted payback rule exhibits the value additive property.
Question 23 of 25
4.0/ 4.0 Points
The NPV value obtained by discounting nominal cash flows using the nominal discountrate is the: I) same as the
NPV value obtained by discounting real cash flows using the real discountrate II) sam e as the NPV value obtained
by discounting real cash flows using the nominal discountrate III) same as the NPV value obtained by discounting
nominal cash flows using the real discountrate
Correct A.I only
B.II only
C.III only
D.II and III only
Question 24 of 25
4.0/ 4.0 Points

16. Market risk is also called:I) systematic risk,II) undiversifiable risk,III) firm specific risk.
A.I only
B.II only
C.III only
Correct D.I and II only
Question 25 of 25
4.0/ 4.0 Points
The costof a resource thatmay be relevant to an investmentdecision even when no cash changes hand is called a
(an):
A.Sunk cost
Correct B.Opportunity cost
C.Working capital
D.None of the above
finc600 Week 4 Assignment – Homework Problems
finc600 Week 4 Assignment
Problem 9-2
A companyis 40% financed by risk-free debt.The interestrate is 10%, the expected marketrisk premium is 8%,and
the beta of the company’s common stock is .5.
Problem 9-16
What types of firms need to estimate industryassetbetas? How would such a firm make the estimate? Des cribe the
process step bystep.
Problem 10-2
Explain how each of the following actions or problems can distortor disruptthe capital budgeting process.a.
Overoptimism byproject sponsors.
b. Inconsistentforecasts ofindustryand macroeconomic variables.
c. Capital budgeting organized solelyas a bottom-up process.
Problem 10-14
Suppose thatthe expected variable costs ofOtobai’s projectare ¥33 billion a year and that fixed costs are zero. a.
How does this change the degree of operating leverage (DOL)? b. Now recompute the operating leverage assuming
that the entire ¥33 billion of costs are fixed.
FINC600 Week 4 Practice Quiz
Corporate Finance
Week 4 Practice Quiz
Question 1 of 10 1.0/ 1.0 Points
Using the companycostof capital to evaluate a projectis :
I) Always correct
II) Always incorrect
III) Correct for projects that are aboutas risky as the average of the firm’s other assets
A.I only
B.II only
C.III only
D.I and III only
Question 2 of 10 1.0/ 1.0 Points
Which of the following type of projects has average risk?

17. A.Speculation ventures
B.New products
C.Expansion of existing business
D.Costimprovement
Question 3 of 10 1.0/ 1.0 Points
The marketvalue of Cable Company’s equityis $60 million,and the marketvalue of its risk-free debt is $40 million. If
the required rate of return on the equity is 15% and that on the debt is 5%, calculate the company’s costofcapital.
(Assume no taxes.)
A.15%
B.10%
C.11%
D.None of the above
Question 4 of 10 1.0/ 1.0 Points
The hurdle rate for capital budgeting decisions is:
A.The cost of capital
B.The cost of debt
C.The costof equity
D.All of the above
Question 5 of 10 1.0/ 1.0 Points
The marketvalue of XYZ Corporation’s common stock is 40 million and the marketvalue of the risk-free debt is 60
million.The beta of the company’s common stock is 0.8,and the expected marketrisk premium is 10%.If the
Treasury bill rate is 6%, whatis the firm’s costof capital? (Assume no taxes.)
A.9.2%
B.14%
C.8.1%
D.None of the above
Question 6 of 10 1.0/ 1.0 Points
On a graph with common stock returns on the Y- axis and marketreturns on the X-axis, the slope of the regression
line represents the:
A.Alpha
B.Beta
C.R-squared
D.Adjusted beta
Question 7 of 10 1.0/ 1.0 Points
Generally, postaudits are conducted for large projects:
A.shortly after the completion ofthe project
B.after several years after the completion ofthe project
C.shortly after the projecthas begun to operate
D.well before the start of the project
Question 8 of 10 1.0/ 1.0 Points
You are given the following data for year-1.
Revenue = $43;
Total costs = $30;

18. Depreciation = $3;
Tax rate = 30%.
Calculate the operating cash flow for the projectfor year-1.
A.$7
B.$10
C.$13
D.None of the above
Question 9 of 10 1.0/ 1.0 Points
The following are drawbacks ofsensitivityanalysis except:
A.it provides ambiguous results.
B.underlying variables are likely to be interrelated.
C.it provides additional information aboutthe projectthat is useful.
D.all of the above statements are drawbacks ofsensitivityanalysis.
Question 10 of 10 1.0/ 1.0 Points
The accounting break-even pointoccurs when:
A.the total revenue line cuts the fixed cost line
B.the presentvalue of inflows line cuts the presentvalue of outflows line
C.the total revenue line cuts the total cost line
D.none of the above
finc600 Week 5 Assignment – Homework Problems
Problem 12-6
House ofHerring plans to pay the entire dividend early in January 2016.All corporate and personal taxes were
repealed in 2014.
a. Other things equal,whatwill be House ofHerring’s stock price after the planned dividend payout?
b. Suppose the companycancels the dividend and announces thatitwill use the money saved to repurchase shares.
What happens to the stock price on the announcementdate? Assume thatinvestors learn nothing aboutth e
company’s prospects from the announcement.How manyshares will the companyneed to repurchase?
c. Suppose the companyincreases dividends to $5.50 per share and then issues new shares to recoup the extra
cash paid out as dividends.What happens to the ex-dividend share prices? How manyshares will need to be issued?
Again, assume investors learn nothing from the announcementaboutHouse ofHerring’s prospects.
Problem 12-12
Respond to the following comment:“It’s all very well saying that I can sell shares to cover cash needs,but that may
mean selling atthe bottom of the market.If the companypays a regular cash dividend,investors avoid that risk.”
Problem 13-11
Executive Chalk is financed solelyby common stock and has outstanding 25 million shares with a marketprice of $10
a share.It now announces thatit intends to issue $160 million ofdebtand to use the proceeds to buy back common
stock.
a. How is the marketprice of the stock affected by the announcement?
b. How manyshares can the company buy back with the $160 million ofnew debtthat it issues? c.What is the
marketvalue of the firm (equity plus debt) after the change in capital structure?

19. d. What is the debtratio after the change in structure?
e. Who (if anyone) gains or loses?
Problem 13-14
“MM totally ignore the fact that as you borrow more,you have to pay higher rates of interest.” Explain carefully
whether this is a valid objection.
FINC600 Week 5 Practice Quiz
Corporate Finance
Week 5 Practice Quiz
Part 1 of 1 – Week 4 REQUIRED Quiz 93.5/ 100.0 Points
Question 1 of 25 4.0/ 4.0 Points
The conceptof compound interestis mostappropriatelydescribed as:
A.Interest earned on an investment
B.The total amountof interestearned over the life of an investment
C.Interestearned on interest
D.None of the above
Question 2 of 25 4.0/ 4.0 Points
Which of the following investmentrules does notuse the time value of the money concept?
A.Net presentvalue
B.Internal rate of return
C.The payback period
D.All of the above use the time value concept
Question 3 of 25 4.0/ 4.0 Points
The unique risk is also called the:
A.Unsystematic risk
B.Diversifiable risk
C.Firm specific risk
D.All of the above
Question 4 of 25 2.0/ 4.0 Points
What are some ofthe importantpoints to remember while estimating the cas h flows ofa project?
The mostimportantpoints are
1) They are estimates.So there can be deviations
2) Some huge loss maycompletelychange the return from product.
3) Other risks like marketrisks,reinvestmentrisk etc. may affect the cash flow pattern

20. Question 5 of 25 4.0/ 4.0 Points
A bond with duration of 10 years has yield to maturity of 10%. This bond’s volatilityis:
A.9.09%
B.6.8%
C.14.6%
D.6.0%
Question 6 of 25 4.0/ 4.0 Points
Major disadvantages ofthe Sarbanes-Oxley Act of 2002 (SOX) are the following except:
A.good investor protection
B.increase in compliance costs
C.that it constrains managers’ abilityto run the firm
D.that it may discourage developmentofhuman capital in the firm
Question 7 of 25 4.0/ 4.0 Points
According to the net presentvalue rule,an investmentin a projectshould be made ifthe:
A.Net presentvalue is greater than the costof investment
B.Net presentvalue is greater than the presentvalue of cash flows
C.Net presentvalue is positive
D.Net presentvalue is negative
Question 8 of 25 0.0/ 4.0 Points
If the Wall Street Journal Quotation for a companyhas the following values close:55.14;Net chg: = + 1.04; then the
closing price for the stock for the previous trading day was?
A.$56.18
B.$54.10
C.$55.66
D.None of the above.
Question 9 of 25 4.0/ 4.0 Points
For example,in the case of an electric car project, which of the following cash flows should be treated as incremental
flows when deciding whether to go ahead with the project?
A.The cost of research and developmentundertaken for developing the electric car in the pastthree years
B.The annual depreciation charge
C.Tax savings resulting from the depreciation charges
D.Dividend payments
Question 10 of 25 4.0/ 4.0 Points
The following are some ofthe actions shareholders can take if the corporation is notperforming well:
A.Replace the board of directors in an election.
B.Force the board of directors to change the managementteam.
C.Sell their shares ofstock in the corporation.
D.Any of the above
Question 11 of 25 4.0/ 4.0 Points
The mixture of debt and equity, used to finance a corporation is also known as:

21. A.Capital budgeting
B.Capital structure
C.Investing
D.Treasury
Question 12 of 25 3.5/ 4.0 Points
Discuss the general principle in the valuation of a common stock.
The value of a common stock is the presentvalue of all the dividends received by owning the stock discounted atthe
marketcapitalization rate. This is called the discounted cash flow (DCF) method.
Feedback:The value of a common stock is the presentvalue of all the dividends received by owning the stock
discounted atthe marketcapitalization rate or the costof equity. This is called the discounted cash flow (DCF)
method.
Comment:reference required
Question 13 of 25 4.0/ 4.0 Points
The managers ofa firm can maximize stockholder wealth by:
A.Taking all projects with positive NPVs
B.Taking all projects with NPVs greater than the cost of investment
C.Taking all projects with NPVs greater than presentvalue of cash flow
D.All of the above
Question 14 of 25 4.0/ 4.0 Points
Florida Company(FC) and Minnesota Company(MC) are both service companies.Their historical return for the past
three years are: FC: – 5%,15%,20%; MC: 8%, 8%, 20%.If FC and MC are combined in a portfolio with 50% of the
funds invested in each, calculate the expected return on the portfolio.
A.12%
B.10%
C.11%
D.None of the above.
Question 15 of 25 4.0/ 4.0 Points
The marketvalue of XYZ Corporation’s common stock is 40 million and the marketvalue of the risk-free debt is 60
million.The beta of the company’s common stock is 0.8,and the expected marketrisk premium is 10%.If the
Treasury bill rate is 6%, whatis the firm’s costof capital? (Assume no taxes.)
A.9.2%
B.14%
C.8.1%
D.None of the above
Question 16 of 25 4.0/ 4.0 Points
The following are importantfunctions offinancial markets:I) Source of financing;II) Provide liquidity; III) Reduce risk;
IV) Source of information

22. A.I only
B.I and II only
C.I, II, III, and IV
D.IV only
Question 17 of 25 4.0/ 4.0 Points
Which of the following portfolios have the leastrisk?
A.A portfolio of Treasury bills
B.A portfolio of long-term United States Governmentbonds
C.Portfolio of U.S. common stocks ofsmall firms
D.None of the above
Question 18 of 25 4.0/ 4.0 Points
PresentValue of $100,000 that is,expected, to be received at the end of one year at a discountrate of 25% per year
is:
A.$80,000
B.$125,000
C.$100,000
D.None of the above
Question 19 of 25 4.0/ 4.0 Points
Discuss some ofthe disadvantages ofthe payback rule.
The disadvantages are thatit does not take the time value of moneyinto accountand also does notuse all the cash
flow. It has limited applications such as small projects
Feedback:The disadvantages are thatit does nottake the time value of money into account and also does no tuse
all the cash flow. It has limited applications such as small projects.
Question 20 of 25 4.0/ 4.0 Points
What is the relationship between interestrates and bond prices?
It’s importantto understand thatbonds and interestrates have an inverse relationship,meaning thatwhen interest
rates go up, existing bond prices go down,and when interestrates are low, bond prices are high.To demonstrate the
reason behind the inverse relationship,you’ll need to understand the conceptof yield.
Feedback: Interest rates and bond prices are inversely related.High interestrates cause bond prices to fall and vice -
versa. For a given change in interestrates,prices of long-term bonds fluctuate more than for short-term bonds.
Similarly,for a given change in interestrates low coupon bond prices fluctuate more than for high coupon bonds.
Question 21 of 25 4.0/ 4.0 Points
Spill Oil Company’s stocks had -8%,11% and 24% rates of return during the lastthree years respectively; calculate
the average rate of return for the stock.
A.8% per year
B.9% per year
C.11% per year
D.None of the above

23. Question 22 of 25 4.0/ 4.0 Points
Which of the following statements regarding the discounted payback period rule is true?
A.The discounted payback rule uses the time value of money concept.
B.The discounted payback rule is better than the NPV rule.
C.The discounted payback rule considers all cash flows.
D.The discounted payback rule exhibits the value additive property.
Question 23 of 25 4.0/ 4.0 Points
The NPV value obtained by discounting nominal cash flows using the nominal discountrate is the: I) same as the
NPV value obtained by discounting real cash flows using the real discountrate II) same as the NPV value obtained
by discounting real cash flows using the nominal discountrate III) same as the NPV value obtained by discounting
nominal cash flows using the real discountrate
A.I only
B.II only
C.III only
D.II and III only
Question 24 of 25 4.0/ 4.0 Points
Market risk is also called:I) systematic risk,II) undiversifiable risk,III) firm specific risk.
A.I only
B.II only
C.III only
D.I and II only
Question 25 of 25 4.0/ 4.0 Points
The costof a resource thatmay be relevant to an investmentdecision even when no cash changes hand is called a
(an):
A.Sunk cost
B.Opportunity cost
C.Working capital
D.None of the above
finc600 Week 6 Assignment – Homework Problems
Complete the following problems in either MicrosoftWord or Excel.
Your work mustbe organized. Highlightyour final answer.
Chapter 14
14-2:
Here are book- and market-value balance sheets ofthe United Frypan Company(UF):
Book Market
Net Working Capital $20 $40 Debt Net Working Capital $20 $40 Debt
Long-term asset$80 $60 Equity Long-term Assets $140 $120 Equity
$100 $100 $160 $160
(The middle-of-the-road partywas founded in 1961 by Miller and Modigliani,always referred to as “MM”, when they
published a proofthat dividend policy is irrelevant in a world without taxes, transaction costs,or other market

24. imperfections.MM argued as follows.Suppose your firm has settled on its investmentprogram.You have a plan to
finance the investments with cash on hand,additional borrowing,and reinvestmentoffuture earnings.Any surplus
cash is to be paid out as dividends.) Assume thatMM’s theory holds with taxes. There is no growth, and the $40 of
debt is expected to be permanent.Assume a 40% corporate tax rate.
a. How much of the firm’s value is accounted for by the debt-generated tax shield?
b. How much better off will UF’s shareholders be ifthe firm borrows $20 more and us es itto repurchase stock?
14-3:
What is the relative tax advantage of corporate debtif the corporate tax rate is Tc = .35, the personal taxrate is Tp =
.35, but all equity income is received as capital gains and escapes tax entirely (TpE = 0)? How does the relative tax
advantage change if the companydecides to pay out all equity income as cash dividends thatare taxed at 15%?
Chapter 15
15-1:
Calculate the weighted-average costof capital (WACC) for Federated Junkyards of America,using the following
information:
• Debt: $75,000,000 book value outstanding.The debt is trading at 90% of book value. The yield to maturity is 9%.
• Equity: 2,500,000 shares selling at$42 per share.Assume the expected rate of return on Federated’s stock is 18%.
• Taxes: Federated’s marginal taxrate is Tc = .35.
15-6:
A project costs $1 million and has a base-case NPVof exactly zero (NPV = 0). What is the project’s APV in the
following cases?
a. If the firm invests,it has to raise $500,000 by a stock issue.Issue costs are 15% of net proceeds.
b. If the firm invests,its debt capacity increases by$500,000.The presentvalue of interesttax shields on this debtis
$76,000.
Show all your work to earn partial credit.
FINC600 Week 6 Practice Quiz
Corporate Finance
Week 6 Practice Quiz
Question 1 of 15 1.0/ 1.0 Points
If the capital markets are efficient, then the sale or purchase ofany securityat the prevailing marketprice is:
A.Always a positive NPV transaction
B.Generally a zero NPV transaction
C.Is always a negative NPV transaction
D.None of the above
Question 2 of 15 1.0/ 1.0 Points
Generally, a firm is able to find positive NPV opportunities with:
I) Financing decisions
II) Capital investmentdecisions
III) Short-term borrowing decisions
A.I only
B.I and III only
C.III only
D.II only
Question 3 of 15 1.0/ 1.0 Points
Stock price cycles or patterns self-destructas soon as investors recognize them through:

25. A.stock marketregulation by the Securities and Exchange Commission (SEC)
B.price fixing by the specialists on New York Stock Exchange
C.trading by the investors
D.none of the above
Question 4 of 15 1.0/ 1.0 Points
Which of the following is a statementof semi-strong form efficiency?
I) If the markets are efficientin the semi-strong form then prices will adjustimmediatelyto public information
II) If the markets are efficientin the semi-strong form then prices reflectall information
III) If the markets are efficient in the semi-strong form then prices will adjustto newly published information after a
long time delay
A.I only
B.II only
C.II and III only
D.III only
Question 5 of 15 1.0/ 1.0 Points
Weak form efficiency implies thatpaststock price(s)
A.patterns tend to repeatitself in the future
B.are major inputs to the investors for forming trading strategies
C.do not matter
D.none of the above
Question 6 of 15 1.0/ 1.0 Points
One importantimplication ofthe efficient markets hypothesis is that:
A.investors should hold a diversified portfolio and avoid active trading.
B.investors can benefit by engaging in day trading.
C.investors should trade actively help to ensure the highestoverall gain in their portfolios.
D.all of the above.
Question 7 of 15 0.0/ 1.0 Points
On January 2, Michigan Mining declared a $25-per-share quarterlydividend payable on March 9th to stockholders of
record on February 9. What is the latestdate by which you could purchase the stock and still get the recently
declared dividend?
A.February 5
B.February 6
C.February 7
D.February 8
Question 8 of 15 1.0/ 1.0 Points
Firms can repurchase shares in the following ways:
I) Open marketrepurchase
II) Through a tender offer
III) Through a Dutch auction process
IV) Through directnegotiation with a major shareholder
A.I only
B.II only
C.III only
D.I, II, III, and IV

26. Question 9 of 15 1.0/ 1.0 Points
CompanyX has 100 shares outstanding.Itearns $1,000 per year and expects to pay all of it as dividends.If the firm
expects to maintain this dividend forever, Calculate the stock price today. (The required rate of return is 10%)
A.$110
B.$90
C.$100
D.None of the above
Question 10 of 15 1.0/ 1.0 Points
Capital structure of the firm can be defined as:
I) the firm’s debt-equityratio
II) the firm’s mixof different securities used to finance assets
III) the marketimperfection thatthe firm’s manager can exploit
A.I only
B.II only
C.III only
D.I, II, and III
Question 11 of 15 1.0/ 1.0 Points
If an investor buys “a” proportion of an unlevered firm’s (firm U) equity then his/her payoff is:
A.(a) * (profits)
B.(a) * (interest)
C.(a) * (profits – interest)
D.none of the above
Question 12 of 15 1.0/ 1.0 Points
If an individual wanted to borrow with limited liabilityhe/she should:
A.Invest in the equity of an unlevered firm
B.Borrow on his/her own account
C.Invest in the equity of a levered firm
D.Invest in a risk-free assetlike T-bills
Question 13 of 15 0.0/ 1.0 Points
Capital structure is irrelevantif:
A.the capital markets are perfect
B.each investor holds a fully diversified portfolio
C.each investor holds the same proportion ofdebtand equity of the firm
D.all of the above
Question 14 of 15 1.0/ 1.0 Points
The effect of financial leverage on the performance ofthe firm depends on:
A.The rate of return on equity
B.The firm’s level of operating income
C.The current marketvalue of the debt
D.The rate of dividend growth

27. Question 15 of 15 1.0/ 1.0 Points
Minimizing the weighted average cost of capital (WACC) is the same as:
A.Maximizing the marketvalue of the firm
B.Maximizing the book value of the firm
C.Maximizing the profits of the firm
D.Maximizing the liquidating value of the firm
finc600 Week 7 Assignment – Homework Problems
Instructions
NAME:
To complete the homework assignments in the templates provided:
1. The question is provided for each problem.You may need to refer to your textbook for additional informa tion
in a few cases.
2. You will enter the required information into the shaded cells.
3. The cells are coded:
a) T requires a text answer.Essayquestions require references;use the textbook.
b) C requires a calculation,using Excel formulas or functions .You cannotperform the operation on a
calculator and then type the answer in the cell.You will enter the calculation in the cell, and only the final
answer will show in the cell. I will be able to review your calculation and correct, if necessary.
c) F requires a number only.In some problems,a Step 1 is added to help you solve the problem.
d) Formula requires a written formula,not the numbers.For example,the rate of return = [(1 + nominal)/
(1+inflation)]-1,or D (debt) + E (equity) = V (value).
4. Name your assignmentfile as “lastnamefirstinitial-FINC600-Week#”,and submitbymidnightET, Day 7.
Instructions:Please refer to your book for assistance with your homework.Postyour work in the worksheet.Highlight
your final answer.
Problem 18-2
Table 18.11 (p. 484 and also provided below) gives abbreviated balance sheets and income statements for Estee
Lauder Companies.Calculate the following ratios:
?
Answers:
a.
Ratio
Return on assets
Net Income/Average Total Assets
b.
Operating profit margin
EBIT/Sales
c.

28. Sales-to-assets ratio
Total Sales/Total assets atstart
1.92
d,
Inventory turnover
COGS/ Inventory at start
2.33
e.
Debtequity ratio
Long term debt at end/Total Shareholder equityat end
0.65
f.
Currentratio
Total current assets atthe end/Total currentliabilities atthe end
1.64
Quick ratio
(Cash and Mkt Securities + Account receivable at the end)/Total current liabilities atthe end
0.85
g.
Formula (in words)
Calculation
TIP: Interest rate – p. 468

29. 0.104
0.103
Principles ofCorporate Finance,Concise,2nd Edition
Instructions:Please refer to your book for assistance with your homework.Postyour work in the worksheet.Highlight
your
final answer.
Problem 19-11
If a firm pays its bills with a 30-day delay, whatfraction of its purchases will be paid in the currentquarter? In the
following
quarter? What if the delay is 60 days?
Step 1:
Worksheet– 30 day delay
2012 Qtr. 4
2013 Qtr.1
2013 Qtr.2
2013 Qtr.3
2013 Qtr.4
Month of
Purchase
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Month for
Payment
T
T
T
T
T
T
T
T
T
T
T

30. T
T
Step 2:
Answers:
30 day delay – Payment made at end of 2013 Qtr1
Fraction from lastquarter
F
Fraction from this quarter
F
Fraction for next quarter
F
60 day delay – Payment made at end of 2013 Qtr1
Fraction from last quarter
F
Fraction from this quarter
F
Fraction for next quarter
F
Worksheet– 60 day delay
2012 Qtr. 4
2013 Qtr.1
2013 Qtr.2
2013 Qtr.3
2013 Qtr.4
Month of
Purchase
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Month for
Payment
T
T
Instructions:Please refer to your book for assistance with your homework.Postyour work in the worksheet.Highlight
your final answer.

31. FINC600 Week 7 Practice Quiz
Corporate Finance
Week 7 Practice Quiz
Part 1 of 1 – 12.0/ 15.0 Points
Question 1 of 15 1.0/ 1.0 Points
Assets are listed on the balance sheetin order of:
I) Decreasing liquidity
II) Decreasing size
III) Increasing size
IV) Relative life
A.I only
B.III and IV only
C.II only
D.IV only
Question 2 of 15 0.0/ 1.0 Points
The difference between Total Assets of a firm and its Total Liabilities is called.
A.Net working capital
B.Net current assets
C.Net worth
D.None of the above
Question 3 of 15 1.0/ 1.0 Points
The difference between CurrentAssets of a firm and its CurrentLiabilities is called.
A.Net worth
B.Net working capital
C.Gross working capital
D.None of the above
Question 4 of 15 1.0/ 1.0 Points
Which of the following is an example of leverage ratios?
A.Debt-Equity ratio
B.Quick ratio
C.Payout ratio
D.Return on equity
Question 5 of 15 1.0/ 1.0 Points
Which of the following is an example of liquidityratios?
A.Times interestearned (TIE)
B.P/E ratio
C.Return on equity
D.Quick ratio
Question 6 of 15 1.0/ 1.0 Points
Given the following data:
Currentassets = 500
Currentliabilities = 250
Inventory = 200
Account receivables = 200

32. Calculate the current ratio:
A.2.0
B.1.0
C.1.5
D.None of the above
Question 7 of 15 1.0/ 1.0 Points
Given the following data:
Sales = 3200
Costof goods sold = 1600
Average total assets = 1600
Average inventory = 200
Calculate the assetturnover ratio:
A.2.0
B.0.9375
C.1.33
D.None of the above
Question 8 of 15 1.0/ 1.0 Points
Efficiency ratios indicate:
I) How productively is the firm utilizing its assets.
II) How liquid is the firm.
III) How profitable is the firm.
IV) How highly is the firm valued by investors.
A.I only
B.II only
C.III only
D.III and IV only
Question 9 of 15 0.0/ 1.0 Points
Profitability ratios indicate:
I) How productively is the firm utilizing its assets.
II) How liquid is the firm.
III) How profitable is the firm.
IV) How highly is the firm valued by the investors.
A.I only
B.II only
C.III only
D.III and IV only
Question 10 of 15 1.0/ 1.0 Points
Given the following assets;
I) Long-term assets
II) Inventories
III) Receivables
IV) Marketable securities
Which is the leastliquid ofthese assets?

33. A.I
B.II
C.III
D.IV
Question 11 of 15 1.0/ 1.0 Points
Given the following data:
Total current assets = $852
Total current liabilities = $406
Long-term debt= $442
Calculate the net working capital.
A.$446
B.$852
C.$410
D.None of the above
Question 12 of 15 1.0/ 1.0 Points
The cash budgetis the primaryshort-term financial planning tool.The key reasons a cash budgetis created are:
I) To estimate your investmentin assets
II) To estimate the size and timing of your new cash flows
III) To prepare for potential financing needs
A.I only
B.II and III only
C.II only
D.III only
Question 13 of 15 1.0/ 1.0 Points
Net working capital is defined as:
A.The current assets in a business
B.The difference between current assets and currentliabilities
C.The presentvalue of all short-term cash flows
D.The difference between all assets and liabilities
Question 14 of 15 1.0/ 1.0 Points
Cash inflow in cash budgeting comes mainlyfrom:
A.Collection on accounts receivable
B.Short-term debt
C.Issue ofsecurities
D.None of the above
Question 15 of 15 0.0/ 1.0 Points
The firm’s internal growth rate is defined as:
A.retained earnings/netincome
B.retained earnings/netassets

34. C.retained earnings/total assets
D.none of the above
FINC600 Week 8 Practice Quiz
Corporate Finance
Week 8 Practice Quiz
Question 1 of 25 4.0/ 4.0 Points
Indirect costs ofbankruptcy are borne principallyby:
A.Bondholders
B.Stockholders
C.Managers
D.The federal government
Question 2 of 25 4.0/ 4.0 Points
Which of the following lists events in the chronological order from earliestto latest?
A.Record date, declaration date, ex-dividend date
B.Declaration date,record date, ex-dividend date
C.Declaration date,ex-dividend date, record date
D.None of the above
Question 3 of 25 4.0/ 4.0 Points
Dividends are decided by:
I) The managers ofa firm
II) The government
III) The board of directors
A.I only
B.II only
C.III only
D.I and II only
Question 4 of 25 3.5/ 4.0 Points
Discuss some examples ofthe conflicts of interestthat may arise between bondholders and stockholders when a firm
is in financial distress.
Question 5 of 25 4.0/ 4.0 Points
The main advantage of debt financing for a firm is:
I) no SEC registration is required for bond issue
II) interestexpense of a firm is tax deductible
III) unlevered firms have higher value than levered firms
A.I only
Question 6 of 25 4.0/ 4.0 Points
Capital structure of the firm can be defined as:
I) the firm’s debt-equityratio
II) the firm’s mixof different securities used to finance assets
III) the marketimperfection thatthe firm’s manager can exploit
Question 7 of 25 4.0/ 4.0 Points
If the capital markets are efficient, then the sale or purchase ofany securityat the prevailing marketprice is:

35. A.Always a positive NPV transaction
B.Generally a zero NPV transaction
C.Is always a negative NPV transaction
D.None of the above
Question 8 of 25 0.0/ 4.0 Points
Briefly describe the traditional position on capital structure.
Question 9 of 25 4.0/ 4.0 Points
Profitability ratios indicate:
I) How productively is the firm utilizing its assets.
II) How liquid is the firm.
III) How profitable is the firm.
IV) How highly is the firm valued by the investors.
Question 10 of 25 3.5/ 4.0 Points
What are the primaryreasons for a companyto use debt in its capital structure?
Question 11 of 25 4.0/ 4.0 Points
The difference between CurrentAssets of a firm and its CurrentLiabilities is called.
A.Net worth
B.Net working capital
C.Gross working capital
D.None of the above
Question 12 of 25 3.5/ 4.0 Points
What are the three basic financial statements?
Question 13 of 25 4.0/ 4.0 Points
The cash budgetis the primaryshort-term financial planning tool.The key reasons a cash budgetis created are:
I) To estimate your investmentin assets
II) To estimate the size and timing of your new cash flows
III) To prepare for potential financing needs
Question 14 of 25 4.0/ 4.0 Points
Firms can repurchase shares in the following ways:
I) Open marketrepurchase
II) Through a tender offer
III) Through a Dutch auction process
IV) Through directnegotiation with a major shareholder
Question 15 of 25 4.0/ 4.0 Points
Stock price cycles or patterns self-destructas soon as investors recognize them through:
A.stock marketregulation by the Securities and Exchange Commission (SEC)
B.price fixing by the specialists on New York Stock Exchange
C.trading by the investors
D.none of the above

36. Question 16 of 25 4.0/ 4.0 Points
Which of the following is a statementof semi-strong form efficiency?
I) If the markets are efficientin the semi-strong form then prices will adjustimmediatelyto public information
II) If the markets are efficientin the semi-strong form then prices reflectall information
III) If the markets are efficient in the semi-strong form then prices will adjustto newly published information after a
long time delay
Question 17 of 25 4.0/ 4.0 Points
Net working capital is defined as:
A.The current assets in a business
B.The difference between current assets and currentliabilities
C.The presentvalue of all short-term cash flows
D.The difference between all assets and liabilities
Question 18 of 25 4.0/ 4.0 Points
If a firm permanentlyborrows $100 million atan interestrate of 8%, what is the presentvalue of the interesttax
shield? (Assume thatthe tax rate is 30%)
A.$8.00 million
B.$5.6 million
C.$30 million
D.$26.67 million
E.None of the above
Question 19 of 25 0.0/ 4.0 Points
The difference between Total Assets of a firm and its Total Liabilities is called.
A.Net working capital
B.Net current assets
C.Net worth
D.None of the above
Question 20 of 25 0.0/ 4.0 Points
Capital structure is irrelevantif:
A.the capital markets are perfect
B.each investor holds a fully diversified portfolio
C.each investor holds the same proportion ofdebtand equity of the firm
D.all of the above
Question 21 of 25 4.0/ 4.0 Points
In order to find the presentvalue of the tax shields provided bydebt, the discountrate used is the:
A.cost of capital
B.cost of equity
C.costof debt
D.none of the above
Question 22 of 25 3.5/ 4.0 Points
What are the common ratios used to measure liquidityof a firm?
Question 23 of 25 2.5/ 4.0 Points
What is the model that is used to prepare a pro-forma statement?

37. Question 24 of 25 3.5/ 4.0 Points
Briefly explain the information contentof share repurchase.
Question 25 of 25 4.0/ 4.0 Points
Generally, a firm is able to find positive NPV opportunities with:
I) Financing decisions
II) Capital investmentdecisions
III) Short-term borrowing decisions