This document contains a 20 question multiple choice final exam for a finance course (FIN101 - 2022). It covers various topics in finance including dividend payment processes, stock exchanges listing requirements, company liquidity ratios, present value calculations using discount rates, weighted average cost of capital, stock valuation, bond features, rates of return, time value of money, and capital markets. It also includes two essay questions about how venture capital firms minimize risk and the four general types of cash dividends.

1. FINAL EXAM ( FIN101 – 2022)
Question1: Which step in the dividend payment process for a public company usually
results in a change in the company's stock price? Assume the dividend has changed from
the last dividend paid.
A. Public announcement
b. Ex-dividend date
c. Payable date
d. Both a and b✅
Question2: Generally, management undertakes a reverse stock split to:
a. Send a signal to investors that the company is expected to perform poorly.
b. Meet the minimum requirements to be listed on one of the major stock exchanges.✅
c. Increase the liquidity of shares by decreasing the number of share available.
d. Reduce the administrative costs associated with investor relations.
Question 3: Lionel, Inc., has current assets of $623,122, including inventory of $241,990,
and current liabilities of 378,454. What is the company liquidity current ratio and quick
ratio?
Answer: 1.01
Question4: In order to calculate the present value of debt tax savings, the is used as the
discount rate
a. WACC.
b. risk-free rate.
c. required rate of return on debt.✅
d. none of the above.
Question5: Bellamee, Inc., has a required rate of return on its assets of 12% and a cost of
debt of 6.25%. Their current debt-to-equity ratio is 1/5. What is the required rate of return
on their equity?
a. 12.15%.
b. 13.15%.✅
c. 14.15%.
d. None of the above.
Question 6: Rubber Chicken Inc. currently has a capital structure that is 40% debt and
60% equity. If the firm's cost of equity is 12%, the cost of debt is 8%, what is the
appropriate WACC?
a. 8.4%.
b. 9.6%.
c. 10.4%.
d. 9.2%.
✅
✅

2. Question7: Stag Corp. will pay dividends of $4.75, $5.25, $5.75, and $7 for the next four
years. Thereafter, the company expects its growth rate to be at a constant rate of 7 percent.
If the required rate of return is 15 percent, what is the current market price of the stock?
Answer:69.41$✅
Question8: Millennium Motors has current pretax annual cash flows of $1,000 and is in the
35% tax bracket. The appropriate discount rate for its cash flows is 12%. Suppose the firm
issues a $1,500 bond What is Millennium's value after the debt issuance?
a. $5,417✅
b. $5,942
c. $6,392
d. None of the above
Question 9:The three principal ways in which venture capital firms exit venture-backed
companies are:
a. selling to a strategic buyer, buying out the founder, and offering stock to the public.
b. selling to a strategic buyer, selling to a financial buyer, and buying out the founder.
c. selling to a strategic buyer, selling to a financial buyer, and offering stock to the public.
d. None of the above.
Question 10: A firm's overall cost of capital is:
a. Equal to its cost debt.
b. A weighted average of the costs of capital for the collection of individual projects that the firm
is working on.
c. Best measured by the cost of capital of the riskiest projects that the firm is working on.
d. None of the above
Question 11:If the market risk premium is currently 6 percent and the risk-free rate of
return is 4 percent, then what is the expected return on a common share with a beta equal
to 2?
a. 8%.
b. 10%.
c. 12%.
d. 16%.✅
Question 12:The impact of a project on a firm's overall value depends on:
a. a firm's accounting earnings.
b. a firm's cash flow.
c. a project's cash flow.✅
d. none of the above.

3. Question 13: It is possible for a firm to have one depreciation schedule for tax purposes and
another for financial reporting purposes.
True✅
False
Question 14:When using Payback period method to evaluate projects:
a. Projects with shorter payback periods are more desirable.✅
b. Projects with longer payback periods are more desirable.
c. Projects with 0 payback periods are more desirable.
d. None of the above.
Question 15: ABC Company has been generating stable revenues but sees no growth in it
for the foreseeable future. The company’s last dividend was $3.25, and it is unlikely to
change the amount paid out. If the required rate of return is 12 percent, what is the stock
worth today?
a. $39.00
b. $3.69
c. $27.08✅
d. $21.23
Question 16: Features of Corporate Bonds:
a. long-term claims against company assets.
b. face (par) value is $1,000.
c. coupon rate is the annual coupon payment (C) divided by a bond’s face value (F).
d. All of the above.✅
Question 17: XYZ Company sold for $25 one year ago, and it is currently selling for $28.
Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the
most recent year? (Round to the nearest percent).
a. 12%
b. 16%✅
c. 32%
d. 40%
Question :To solve present value problems with multiple cash flows involves which of the
following steps?
a. First, draw a time line to make sure that each cash flow is placed in the correct time period.
b. Second, calculate the present value of each cash flow for its time period.
c. Third, add up the present values.
d. All of the above are necessary steps.✅

4. 18.75%✅

5. Question 19: The going concern assumption implies that:
a. a firm will continue to be in business forever.✅
b. a firm will be going out of business in the near future.
c. a firm will continue to operate in the near future but only after being acquired by another firm.
d. none of the above.
Question 20: The financial market where a new security is sold for the first time is:
a. A primary market.✅
b. A secondary market.
c. An indirect market.
d. None of the above.
ESSAY:
Q1-Briefly describe how ventures capital minimize their risk:
Answer:
The primary ways VCs mitigate risk are (1) time
diversification, (2) stage diversification, (3), sector
diversification, (4) pro-rata or over pro-rata investing
over time, and (5) number of investments in the
portfolio.
Q2-Name the four general types of cash dividends:
Answer:
The most common form of a dividend is known as the regular cash dividend,
which is paid on a regular basis. It is typically set at a level that management
generally expects the company to be able to maintain in the long run, barring
major changes in the fortune of the firm. The extra dividend is generally paid when
the firm has earnings that are higher than expected. The special dividend is a one time payment
to stockholders and is used to distribute large amounts of cash. It
may be used to distribute the proceeds from the sale of a major asset or business or
even to alter the capital structure of the firm. A liquidating dividend is paid to
stockholders when a firm is liquidated and will no longer continue doing business.
Note that the proceeds form the liquidating dividend are available only after all