FINAL EXAMS FINAL ANSWERS FINAL QUESTIONS

1. FIN 571 FINAL EXAMS
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1) Which principle states that extraordinary returns are achievable with new ideas?
2) Occurs when a "follower" receives the benefit of an expenditure made by a "leader" by
imitating the leader's behavior.
3) Occurs when inaccurate information can falsely exist.
4) The annual report refers to
5) Remaining maturity refers to:
6) Generally accepted accounting principles (GAAP) refers to
7) The firm’s assets in the balance sheet refer to:
8) Original maturity refers to:
9) Book value (or Net book value) refers to:
10) Preferred stock payment obligations are typically __________.
11) Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9%
and the current yield is 10%. Which of the following statements is true?
12) If the yield to maturity for a bond is less than the bond's coupon rate, then the market value
of the bond is __________.
13) According to the CAPM, the expected return for a portfolio is determined by the portfolio's.
14) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much
internationally. Possible factors include __________.
15) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much
internationally. Possible factors include __________.

2. 16) One problem with using negative values for w1 (the proportion invested in the riskless asset)
to represent a borrowed amount is that the implied borrowing rate of interest is the same as
__________.
17) According to the Principle of Risk-Return Trade-Off, investors require a higher return to
compensate for __________.
18) The Principle of __________ implies that the expected return for an asset equals its required
return.
19) Stony Products has a receivables turnover of ten times. What is Stony’s receivables
collection period (RCP)?
20) Stony Products has a payables turnover of six times. What is Stony's payables deferral period
(PDP)?
21) Stony Products has an inventory conversion period (ICP) of about 60.83 days. The
receivables collection period (RCP) is 36.50 days. The payables deferral period (PDP) is about
30.42 days. What is Stony's cash conversion cycle (CCC)?
22) Bank term loans represent __________.
23) __________ says to compare the benefits and costs of alternative uses and sources of money
using after-tax APYs.
24) Firms make short-term financial decisions just about every day solving such questions as
__________.
25) Which (if any) of the following statements is false?
26) Credit-policy decisions involve all aspects of receivables management. The decision does
NOT include which of the following?
27) Which of the following statements is (are) true?
28) An all-equity-financed firm would __________.
29) Whenever a firm splits itself into separate units, with each unit having limited liability with
respect to its financing, the capital structure of each unit becomes __________.

3. 30) A profitable firm would __________.
31) The capital budgeting process can be broken down into five steps. These steps include which
of the following?
32) Ideas for capital budgeting projects come from all levels within an organization. The bottom
up process results in ideas percolating through the organization.
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.
34) Net present value ( NPV) is the difference between __________.
35) Whenever projects are both independent and conventional, then the IRR and NPV methods
agree. Which of the following statements is true?
36) In practice, the __________ rule is preferred.
37) Studies show systematic differences in capital structures across industries. These are due
mostly to differences in __________.
38) Studies show systematic differences in capital structures across industries. These are due
mostly to differences in __________.
39) A firm cannot simply adopt the industry average debt ratio, because differences exist among
firms in any particular industry with respect to __________.
40) There can be a variety of motives for stock repurchases including __________.
41) There can be a variety of motives for stock repurchases including __________.
42) Some countries have __________ in which shareholders' returns are not fully taxed twice.
43) Conditional sales contracts __________.
44) The Time Value of Money Principle says __________.
45) Stated maturity is __________.

4. 46) __________ says to calculate the net advantage of leasing based on the incremental after-tax
benefits that leasing will provide.
47) __________ says to look for opportunities to develop asset-based financing arrangements
that offer new positive-NPV financing mechanisms.
48) The Principle of Self-Interested Behavior says __________.
49) The wholesale price for Captain John’s is $3.00 per loaf. One million loaves will be sold in
the next year. What is the contribution margin?
50) 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 4.5 million loaves in the next five years. What additional revenues minus expenses
will be generated from expansion?
51) The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of production
is $0.50 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional
5.0 million loaves in the next year. What additional revenues minus expenses will be generated
from expansion?
52) Which of the following statements is true?
53) Pursuing valuable ideas is the best way __________.
54) Due to asymmetric information, the market fears that a firm issuing securities will do so
when the stock is ___________.
55) __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows of
alternative decisions.
56) __________ says to carefully evaluate and monitor the financial plan’s impact on the firm
and its stakeholders.
57) ___________ says to use both bottom-up and top-down processes to increase the chance of
uncovering valuable ideas.