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1. American Public University System FINC
600 Week 8 Final Quiz
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Session 2015-2016
FINC 600 Week 8 Final Quiz
Question1
If an investorbuys"a"proportionof anunleveredfirm's(firmU) equitythenhis/herpayoff is:
A.(a) * (profits)
B.(a) * (interest)
C.(a) * (profits - interest)
D.none of the above
Question2
What isthe model thatisusedto prepare a pro-formastatement?
Question3
Whichof the followingisastatementof semi-strongformefficiency?
I) If the marketsare efficientinthe semi-strongformthenpriceswill adjustimmediatelytopublic
information
II) If the marketsare efficientinthe semi-strongformthenpricesreflectall information

2. III) If the marketsare efficientinthe semi-strongformthenpriceswilladjusttonewlypublished
informationafteralong
time delay
A.Ionly
B.IIonly
C.IIand IIIonly
D.IIIonly
Question4
In orderto calculate the tax shieldeffectof interestpaymentforacorporation,alwaysuse the:I)
average corporate tax
Week8 REQUIRED Quiz
https://edge.apus.edu/portal/tool/d61270c7-eb07-4c9e-9302-
b89ed42735ed/jsf/select/selectIndex[8/29/2014 1:20:20 PM]
rate II) marginal corporate tax rate III) state mandatedtax rate
A.Ionly
B.IIonly
C.IIIonly
D.I and IIIonly
Question5
State the importantdifferencesbetweeninvestmentdecisionsandfinancingdecisions.
Question6
In orderto findthe presentvalue of the tax shieldsprovidedbydebt,the discountrate usedisthe:
A.costof capital
B.cost of equity

3. C.costof debt
D.none of the above
Question7
Capital structure isirrelevantif:
A.the capital marketsare perfect
B.eachinvestorholdsafullydiversifiedportfolio
C.eachinvestorholdsthe same proportionof debtandequityof the firm
D.all of the above
Question8
The cash budgetisthe primaryshort-termfinancialplanningtool.The keyreasonsacashbudgetis
createdare:
I) To estimate yourinvestmentinassets
II) To estimate the size andtimingof yournew cash flows
III) To prepare forpotential financingneeds
A.Ionly
B.IIand III only
C.IIonly
D.IIIonly
Question9
Whichof the followingisanexample of leverage ratios?
A.Debt-Equityratio

4. B.Quickratio
C.Payoutratio
D.Returnon equity
Question10
Brieflyexplainthe informationcontentof share repurchase.
Question11
The reasonthat MM PropositionIdoesnotholdgoodinthe presence of corporate taxesisbecause:
A.Leveredfirmspaylowertaxeswhencomparedwithidentical unleveredfirms
B.Bondholdersrequire higherratesof returncomparedwithstockholders
C.Earningspershare are no longerrelevantwithtaxes
D.Dividendsare nolongerrelevantwithtaxes
Question12
Whichof the followingstatement(s) is/are true if the efficientmarkethypothesisholds?
I) It impliesperfectforecastingability
II) It impliesmarketisirrational
III) It impliesthatpricesfollow aparticularpattern
IV) It impliesthatpricesreflectall availableinformation
A.Ionly
B.IIonly
C.I andIII only
D.IV only

5. Question13
Giventhe followingdata:
Sales= 3200
Cost of goodssold= 1600
Average total assets= 1600
Average inventory=200
Calculate the assetturnoverratio:
A.2.0
B.0.9375
C.1.33
D.None of the above
Question14
The after-tax weightedaverage costof capital isdeterminedby:
A.Multiplyingthe weightedaverage aftertax costof debtby the weightedaverage costof equity
B.Addingthe weightedaverage before tax costof debtto the weightedaverage costof equity
C.Addingthe weightedaverage aftertax costof debtto the weightedaverage costof equity
D.Dividingthe weightedaverage before tax costof debtto the weightedaverage costof equity
Question15
Generally,afirmisable to findpositiveNPV opportunitieswith:
I) Financingdecisions
II) Capital investmentdecisions

6. III) Short-termborrowingdecisions
A.Ionly
B.I andIII only
C.IIIonly
D.IIonly
Week8 REQUIRED Quiz
https://edge.apus.edu/portal/tool/d61270c7-eb07-4c9e-9302-
b89ed42735ed/jsf/select/selectIndex[8/29/2014 1:20:20 PM]
Question16
If a firmpermanentlyborrows$100 millionataninterestrate of 8%, whatis the presentvalue of the
interesttax shield?
(Assume thatthe tax rate is30%)
A.$8.00 million
B.$5.6 million
C.$30 million
D.$26.67 million
E.None of the above
Question17
Giventhe followingdata:
Total currentassets= $852
Total currentliabilities=$406
Long-termdebt= $442
Calculate the networkingcapital.

7. A.$446
B.$852
C.$410
D.None of the above
Question18
Assumingthatbondsare soldat a fairprice,the benefitsfromthe tax shieldgotothe:
A.managersof the firm
B.bondholdersof the firm
C.stockholdersof the firm
D.lawyersof the firm
Question19
Whichof the followingisanexample of liquidityratios?
A.Timesinterestearned(TIE)
B.P/Eratio
C.Returnonequity
D.Quickratio
Question 20
The firm'sinternal growthrate is definedas:
A.retainedearnings/netincome
B.retainedearnings/netassets

8. C.retainedearnings/total assets
D.none of the above
Question21
Discussthe processof preparinga financial plan?
Question22
If an individual wantedtoborrowwithlimitedliabilityhe/she should:
A.Investinthe equityof anunleveredfirm
B.Borrowon his/herownaccount
C.Investinthe equityof aleveredfirm
D.Investina risk-free assetlike T-bills
Question23
Firmscan repurchase sharesinthe followingways:
I) Openmarketrepurchase
II) Through a tenderoffer
III) Througha Dutchauctionprocess
IV) Throughdirectnegotiationwithamajorshareholder
A.Ionly
B.IIonly
C.IIIonly
D.I,II, III,and IV

9. Question24
Minimizingthe weightedaverage costof capital (WACC) isthe same as:
A.Maximizingthe marketvalue of the firm
B.Maximizingthe bookvalue of the firm
C.Maximizingthe profitsof the firm
D.Maximizingthe liquidatingvalueof the firm
Question25
The peckingordertheoryof capital structure predictsthat:
A.If twofirmsare equallyprofitable,the more rapidlygrowingfirmwill borrow more,otherthingsequal
B.Firmspreferequitytodebtfinancing
C.Riskyfirmswill endupborrowingless
D.Riskyfirmswill endupborrowingmore
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