This document provides a summary of key concepts and formulas from corporate finance and financial management. It includes 30 multiple choice questions covering topics such as capital budgeting, capital structure, the cost of capital, financial statement analysis, stock and bond valuation. The questions assess understanding of concepts like the weighted average cost of capital (WACC), net present value (NPV), dividend discount models, financial ratios, and bond pricing.

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2. 1. Which of these provide a forum in which demanders of funds raise funds by issuing new financial instruments, such as stocks
and bonds?
2. 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
3. Which of these statements is true regarding divisional WACC?
4. Which financial statement reports the amounts of cash that the firm generated and distributed during a particular time period?
5. 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?
6. Financial plans include which of the following?
7. Which of the following terms means that during periods when interest rates change substantially, bondholders experience
distinct gains and losses in their bond investments
8. Which of these is used as a measure of the total amount of available cash flow from a project?
9. The overall goal of the financial manager is to__________
10. 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.
11. When firms use multiple sources of capital, they need to calculate the appropriate discount rate for valuing their firm92s cash
flows as _____.
12. What are the tools available for the manager in financial planning
13. As new capital budgeting projects arise, we must estimate__________.
14. What are reasons for the firm to go abroad?
15. The Rule of 72 is a simple mathematical approximation for__________
16. Which of these is the term for portfolios with the highest return possible for each risk level?
17. Which of the following can create ethical dilemmas between corporate managers and stockholders?
18. 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 97 generally one year?
19. 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?
20. Which financial statement reports a firm's assets, liabilities, and equity at a particular point in time?
21. 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
22. What's the current yield of a 6 percent coupon corporate bond quoted at a price of 101.70?
23. The top part of Mars, Inc.'s 2013 balance sheet is listed as follows (in millions of dollars). What are Mars, Inc.'s current ratio,
quick ratio, and cash ratio for 2013?
24. 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?
25. Which of the following is a true statement?
26. 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?
27. We commonly measure the risk-return relationship using which of the following?
28. Which of these ratios show the combined effects of liquidity, asset management, and debt management on the overall
operation results of the firm?
29. We can estimate a stock's value by__________
30. We call the process of earning interest on both the original deposit and on the earlier interest payments