Corporate Finance
Final Test Solutions
Course Introduction
Corporate Finance explores the fundamental principles and practices governing the financial management of corporations. This course covers essential topics such as valuation, capital budgeting, risk and return, cost of capital, capital structure, dividend policy, and working capital management. Students will learn how financial decisions affect the value of the firm and gain practical skills in analyzing investment opportunities, managing corporate resources, and understanding the role of financial markets and institutions in supporting corporate growth and efficiency. The course aims to develop both theoretical insights and applied decision-making abilities required for effective corporate financial strategy.
Recommended Textbook Essentials of Corporate Finance 9th Edition by Stephen Ross
Available Study Resources on Quizplus
18 Chapters
1640 Verified Questions
1640 Flashcards
Source URL: https://quizplus.com/study-set/3042
Page 2
Chapter 1: Introduction to Financial Management
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/60473
Sample Questions
Q1) The primary goal of financial management is to maximize:
A)current profits.
B)market share.
C)current dividends.
D)the market value of existing stock.
E)revenue growth.
Answer: D
Q2) You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE.This sale will occur in the:
A)dealer market.
B)over-the-counter market.
C)secondary market.
D)primary market.
E)tertiary market.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Financial Statements,Taxes,and Cash Flow
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/60472
Sample Questions
Q1) Last year,The Pizza Joint added $6,230 to retained earnings from sales of $104,650.The company had costs of $87,300,dividends of $2,500,and interest paid of $1,620.Given a tax rate of 34 percent,what was the amount of the depreciation expense?
A)$2,407
B)$1,908
C)$2,503
D)$3,102
E)$3,414
Answer: C
Q2) The market value of a firm's fixed assets:
A)will always exceed the book value of those assets.
B)is more predictable than the book value of those assets.
C)in addition to the firm's net working capital reflects the true value of a firm.
D)is decreased annually by the depreciation expense.
E)is equal to the estimated current cash value of those assets.
Answer: E
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Working With Financial Statements
Available Study Resources on Quizplus for this Chatper
119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/60471
Sample Questions
Q1) The Donut Hut has sales of $68,000,current assets of $11,300,net income of $5,100,net fixed assets of $54,900,total debt of $23,800,and dividends of $800.What is the sustainable growth rate?
A)10.48 percent
B)11.29 percent
C)11.79 percent
D)12.08 percent
E)12.39 percent
Answer: B
Q2) Leon is the owner of a corner store.Which ratio should he compute if he wants to know how long the store can pay its bills given its current level of cash and accounts receivable? Assume all receivables are collectible when due.
A)Current ratio
B)Debt ratio
C)Cash coverage ratio
D)Cash ratio
E)Quick ratio
Answer: E
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Introduction to Valuation: The Time Value of Money
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/60470
Sample Questions
Q1) You're trying to save to buy a new car valued at $48,690.You have $38,000 today that can be invested at your bank.The bank pays 3.7 percent annual interest on its accounts.How long will it be before you have enough to buy the car for cash? Assume the price of the car remains constant.
A)5.13 years
B)9.29 years
C)4.67 years
D)7.08 years
E)6.82 years
Q2) Travis invests $5,500 today into a retirement account.He expects to earn 9.2 percent,compounded annually,on his money for the next 13 years.After that,he wants to be more conservative,so only expects to earn 6 percent,compounded annually.How much money will he have in his account when he retires 25 years from now,assuming this is the only deposit he makes into the account?
A)$29,411.20
B)$34,747.80
C)$34,616.56
D)$41,919.67
E)$42,003.12
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Discounted Cash Flow Valuation
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/60469
Sample Questions
Q1) What is the effective annual rate of 8.25 percent compounded quarterly?
A)8.25 percent
B)8.49 percent
C)8.38 percent
D)8.51 percent
E)8.56 percent
Q2) Julie is borrowing $14,950 to purchase a car.The loan terms are 48 months at 6.95 percent interest,compounded monthly.How much interest,rounded to the nearest dollar,will she pay on this loan if she pays the loan as agreed?
A)$2,338
B)$2,414
C)$1,959
D)$1,806
E)$2,217
Q3) Which one of the following is the annuity present value formula?
A)C ×({1 - [1/(1 + r)t]}/r)
B)C ×({1 - [1/(1 + r)t]} -r)
C)C ×({1 - [r/(1 + r)t]}/r)
D)C ×({1 - [1/(1 ×r)t]} ×r)
E)C ×({1 - [r/(1 ×r)t]} ×r)
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Interest Rates and Bond Valuation
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/60468
Sample Questions
Q1) Jeffries,Inc.,has semiannual,6 percent coupon bonds on the market that currently have 11 years left to maturity.If the market rate of return for this bond is 7.13 percent three years from now,what will be the bond's clean price at that time?
A)$925.88
B)$932.00
C)$903.14
D)$921.42
E)$933.33
Q2) A bond has a $1,000 face value,a market price of $1,045,and pays interest payments of $74.50 every year.What is the coupon rate?
A)6.76 percent
B)7.00 percent
C)7.12 percent
D)7.45 percent
E)8.14 percent
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: Equity Markets and Stock Valuation
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/60474
Sample Questions
Q1) Which one of the following is an electronic network that enables Katie to sell her shares of ABC stock directly to Marti?
A) SuperDOT
B) POST
C) ECN
D) SEAT
E) eNET
Q2) Laura owns 6,700 shares of GP Global stock worth $92,460. The firm has 15,000 shares outstanding. Each share is entitled to one vote under the straight voting policy of the firm. The next election is in four months at which time four directors are up for election. How much more must Laura invest in this firm to guarantee her election to the board?
A) $0
B) $6,554.00
C) $11,053.80
D) $8,406.15
E) $14,478.80
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Net Present Value and Other Investment Criteria
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/60467
Sample Questions
Q1) A project has the following cash flows.What is the internal rate of return?
\[\begin{array} { | c | r | }
\hline \text { Year } & \text { Cash Flow } \\
\hline 0 & - \$ 89,300 \\
\hline 1 & 32,900 \\
\hline 2 & 64,200 \\
\hline 3 & 5,800 \\
\hline \end{array}\]
A)11.21 percent
B)10.47 percent
C)10.72 percent
D)8.57 percent
E)9.19 percent
Q2) The payback method of analysis ignores which one of the following?
A)Initial cost of an investment
B)Arbitrary cutoff point
C)Cash flow direction
D)Time value of money
E)Timing of each cash inflow
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Making Capital Investment Decisions
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/60466
Sample Questions
Q1) A project requires $428,000 of equipment that is classified as seven-year property.What is the depreciation expense in Year given the following MACRS depreciation allowances,starting with Year 1: 14.29,24.49,17.49,12.49,8.93,8.92,8.93,and 4.46 percent?
A)$89,038.42
B)$48,447.30
C)$56,038.15
D)$74,857.20
E)$104,817.20
Q2) Hunter's Lodge purchased $612,000 of equipment four years ago.The equipment is seven-year MACRS property.The firm is selling this equipment today for $174,500.What is the aftertax cash flow from this sale if the tax rate is 34 percent? The ACRS allowance percentages are as follows,commencing with Year 1:14.29,24.49,17.49,12.49,8.93,8.92,8.93,and 4.46 percent.
A)$187,407.35
B)$180,174.19
C)$198,410.18
D)$168,825.81
E)$176,610.81
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Some Lessons From Capital Market History
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/136798
Sample Questions
Q1) A bond has an average return of 11.2 percent and a standard deviation of 14.6 percent.What range of returns would you expect to see 68 percent of the time on this security?
A)-18 percent to 43.9 percent
B)-18 percent to 40.1 percent
C)-3.4 percent to 27.8 percent
D)-3.4 percent to 25.8 percent
E)-2.5 percent to 13.9 percent
Q2) Dan is a chemist for ABC,a major drug manufacturer.Dan cannot earn excess profits on ABC stock based on the knowledge he has related to his experiments if the financial markets are:
A)weak form efficient.
B)strong form efficient.
C)semistrong form efficient.
D)efficient at any level.
E)aware that the trader is an insider.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Risk and Return
Available Study Resources on Quizplus for this Chatper
39 Verified Questions
39 Flashcards
Source URL: https://quizplus.com/quiz/60464
Sample Questions
Q1) A portfolio is comprised of 35 securities with varying betas.The lowest beta for an individual security is .74 and the highest of the security betas of 1.51.Given this information,you know that the portfolio beta:
A)must be 1.0 because of the large number of securities in the portfolio.
B)is the geometric average of the individual security betas.
C)must be less than the market beta.
D)will be between 0 and 1.0.
E)will be greater than or equal to .74 but less than or equal to 1.51.
Q2) Which one of the following best exemplifies unsystematic risk?
A)Unexpected economic collapse
B)Unexpected increase in interest rates
C)Unexpected increase in the variable costs for a firm
D)Sudden decrease in inflation
E)Expected increase in tax rates
Q3) Standard deviation measures risk while beta measures risk.
A)systematic; unsystematic
B)unsystematic; systematic
C)total; unsystematic
D)total; systematic
E)asset-specific; market
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Cost of Capital
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/60463
Sample Questions
Q1) Precision Cuts has a target debt-equity ratio of .48.Its cost of equity is 16.4 percent,and its pretax cost of debt is 8.2 percent.If the tax rate is 34 percent,what is the company's WACC?
A)13.20 percent
B)11.72 percent
C)12.91 percent
D)11.28 percent
E)12.84 percent
Q2) Tim's Tools just issued a dividend of $2.22 per share on its common stock.The company is expected to maintain a constant 2.8 percent growth rate in its dividends indefinitely.If the stock sells for $19 a share,what is the company's cost of equity?
A)12.81 percent
B)13.37 percent
C)9.94 percent
D)14.81 percent
E)10.46 percent
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Leverage and Capital Structure
Available Study Resources on Quizplus for this Chatper
89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/60462
Sample Questions
Q1) Which one of the following represents the present value of the interest tax shield?
A)D ×(1 -T<sub>c</sub>)
B)D(1 -T<sub>c</sub>)
C)D/T<sub>c</sub>
D)D-D(T<sub>c</sub>)
E)T<sub>c</sub> ×D
Q2) Gabella's is an all-equity firm that has 36,000 shares of stock outstanding at a market price of $27 a share.The firm has earnings before interest and taxes of $57,600 and has a 100 percent dividend payout ratio.Ignore taxes.Gabella's has decided to issue $125,000 of debt at a rate of 9 percent and use the proceeds to repurchase shares.Terry owns 800 shares of Gabella's stock and has decided to continue holding those shares.How will Gabella's debt issue affect Terry's annual dividend income?
A)Decrease from $640 to $567
B)Increase from $2,160 to $1,890
C)Decrease from $640 to $591
D)Increase from $1,890 to $2,160
E)No change
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Dividends and Dividend Policy
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/60461
Sample Questions
Q1) The Sports Store is preparing to pay its quarterly dividend of $1.47 a share.The stock closed at $62.80 a share today and goes ex-dividend tomorrow.What will the ex-dividend stock price be if the relevant tax rate is 15 percent and all else is held constant?
A)$62.28
B)$62.20
C)$61.55
D)$61.33
E)$61.28
Q2) Two weeks ago,Jensen' s declared a dividend of $1.34 a share.The ex-dividend date is tomorrow.All else constant,which one of the following is the best estimate of Jensen' s opening stock price tomorrow?
A)$1.34 lower than today's closing price
B)Today's closing price minus an amount approximately equal to the aftertax value of the dividend
C)The same as today's closing price since the dividend is expected
D)$1.34 higher than today's closing price
E)Today's closing price plus an amount approximately equal to the aftertax value of the dividend
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Raising Capital
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/60460
Sample Questions
Q1) When issuing securities,which of the following can occur prior to receiving the approval by the SEC of a registration statement?
I.Oral offer to buy shares
II.Written offer to buy shares
III.Final determination of the offer price
IV.Distribution of a preliminary prospectus
A)I only
B)III only
C)III and IV only
D)I and IV only
E)None of the listed activities can occur until after the SEC approval is received
Q2) What is the legal document called that is provided to potential investors and describes a new security offering?
A)Security agreement
B)Prospectus
C)Public statement
D)Registration statement
E)Formal filing
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Short-Term Financial Planning
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/60459
Sample Questions
Q1) Which statement is true?
A)A decrease in the accounts receivable turnover rate decreases the cash cycle.
B)Paying a supplier within the discount period rather than waiting until the end of the normal credit period will decrease the cash cycle.
C)The number of days in the cash cycle can be positive, negative, or equal to zero.
D)An increase in the inventory turnover rate must increase the cash cycle.
E)The payables period must be shorter than the receivables period.
Q2) Theo's has estimated quarterly sales,starting with Quarter 1,of $9,800,$10,700,$12,400,and $14,600.Purchases are equal to 66 percent of the following quarter's sales and are payable in 90 days.Assume there are 30 days in each month.How much will Theo's pay its suppliers in the third quarter?
A)$9,636
B)$7,656
C)$8,184
D)$8,420
E)$9,860
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Working Capital Management
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/167247
Sample Questions
Q1) On April 14,McCallister's purchased $7,800 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _____ and the effective annual rate is _____ percent.
A)$200; 14.95
B)$156; 44.59
C)$400; 14.95
D)$400; 27.38
E)$400; 44.59
Q2) KL Textiles writes 22 checks a day for an average amount of $827 each.These checks generally clear the bank 3.5 days after they are written.In addition,the firm generally receives an average of $23,902 a day in checks.Deposited amounts are available after one day.What is the amount of the firm's disbursement float?
A)$11,951
B)$23,902
C)$39,777
D)$29,840
E)$63,679
To view all questions and flashcards with answers, click on the resource link above.
19
Chapter 18: International Aspects of Financial Management
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/60457
Sample Questions
Q1) Currently,you can exchange 100 for $124.15.The inflation rate in Europe is expected to be 3.3 percent as compared to 3.1 percent in the U.S.Assuming that relative purchasing power parity exists,what should the exchange rate be five years from now?
A) .8098/$1
B) .8136/$1
C) .8071/$1
D) .8039/$1
E) .7975/$1
Q2) Which one of the following is the best universal definition of an exchange rate?
A)Price of one country's currency expressed in terms of another country's currency
B)Number of foreign dollars that can be purchased for every one U.S.dollar paid
C)Price of a country's currency expressed in terms of that country's currency unit
D)Number of units of a currency that were originally required to obtain one euro when a country adopted the euro as its official currency
E)Price that must be paid to obtain a good or service from another country
To view all questions and flashcards with answers, click on the resource link above. Page 20