Corporate Financial Strategy
Final Exam
Course Introduction
Corporate Financial Strategy delves into the principles and practices guiding financial decision-making within corporations. The course covers the formulation and implementation of strategies for capital structure, funding sources, risk management, and value creation. Emphasis is placed on aligning financial decisions with overall business objectives, including mergers and acquisitions, dividend policy, and investment choices. Through case studies and real-world examples, students learn to critically evaluate financial strategies and understand their impact on a firms long-term growth and competitive advantage.
Recommended Textbook
Corporate Finance 12th Edition by Ross
Available Study Resources on Quizplus
31 Chapters
2423 Verified Questions
2423 Flashcards
Source URL: https://quizplus.com/study-set/3297
Page 2
Chapter 1: Introduction to Corporate Finance
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/65422
Sample Questions
Q1) Why might a highly successful sole proprietor change the structure of his/her firm to the corporate form of ownership if that change results in the sharing of profits with other investors?
Answer: A sole proprietorship has a limited life,limited access to additional capital,and unlimited liability for the owner.By switching to the corporate form,the sole proprietor can obtain additional capital while reducing his/her potential liability to the amount he/she invested in the firm.Also,the sole proprietor can sell a portion of the business enabling him/her to diversify their holdings while still maintaining majority control if desired.The primary downside of the change is the incurrence of double taxation.
Q2) Members of the board of directors are selected by:
A)shareholder voting.
B)company management.
C)the firm's Chief Executive Officer.
D)the largest five shareholders.
E)the firm's managers and employees.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Financial Statements and Cash Flow
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/65421
Sample Questions
Q1) Thompson's Jet Skis has operating cash flow of $11,618.Depreciation is $2,345 and interest paid is $395.A net total of $485 was paid on long-term debt.The firm spent $6,180 on fixed assets and decreased net working capital by $420.What is the cash flow of the firm?
A)$5,858
B)$8,203
C)$9,228
D)$5,018
E)$7,363
Answer: A
Q2) Last year,Webster Farms had annual revenue of $87,200,depreciation of $11,600,cost of goods sold of $54,700,and administrative expenses of $8,300.The firm paid $3,200 in dividends and paid taxes of $2,646.What was the operating cash flow?
A)$21,500
B)$18,300
C)$23,100
D)$21,554
E)$23,700
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Financial Statements and Cash Flow
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/65420
Sample Questions
Q1) The sustainable rate of growth for a firm can be increased by:
A)decreasing the debt-equity ratio.
B)decreasing the profit margin.
C)increasing the dividend payout ratio.
D)increasing the capital intensity ratio.
E)increasing the total asset turnover.
Answer: E
Q2) Western Wear has total sales of $642,100,EBIT of $93,900,net income of $50,800,current assets of $153,500,total assets of $658,000,current liabilities of $78,900,and total liabilities of $213,600.What are the values of the three components of the DuPont identity?
A)7.91 percent; 1.02; 1.48
B)8.57 percent; 1.02; .68
C)7.91 percent; .98; 1.48
D)11.43 percent; .98; .68
E)11.43 percent; 1.02; 1.48
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Discounted Cash Flow Valuation
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/65419
Sample Questions
Q1) What is the effective annual rate of 10.25 percent compounded continuously?
A)10.98 percent
B)11.11 percent
C)10.79 percent
D)11.04 percent
E)10.86 percent
Q2) An insurance settlement offer includes annual payments of $36,000,$42,000,and $50,000 over the next three years,respectively,with the first payment being made one year from today.What is the minimum amount you should accept today as a lump sum settlement if your discount rate is 7 percent?
A)$119,877.67
B)$111,144.18
C)$105,000.10
D)$118,924.27
E)$114,556.88
Q3) Tobi owns a perpetuity that will pay $1,500 a year,starting one year from now.He offers to sell you all the payments remaining after the first 25 payments have been paid.What price should you offer him today for payments 26 onward if the discount rate is 8 percent? What does your offer price illustrate about the value of perpetuities?
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Net Present Value and Other Investment Rules
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/65418
Sample Questions
Q1) The profitability index:
A)rule often results in decisions that conflict with the decisions based on the net present value rule.
B)is useful as a decision tool when investment funds are limited and all available funds are allocated.
C)method is most commonly used when deciding between mutually exclusive projects of varying size.
D)rule states that the project with the lower index value should be accepted.
E)produces results which typically are difficult to comprehend.
Q2) An investment with an initial cost of $4,000 produces cash flows of $3,400, $500,$2,800, $100,and $6,000 for Years 1 to 5,respectively.How many IRRs does this project have? A)4
Q3) List and briefly discuss the advantages and disadvantages of the internal rate of return (IRR).
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Making Capital Investment Decisions
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/65417
Sample Questions
Q1) The top-down approach to computing the operating cash flow:
A)ignores all noncash items.
B)applies only if a project produces sales.
C)can only be used if the entire cash flows of a firm are included.
D)is equal to: Sales Costs Taxes + Depreciation.
E)includes the interest expense related to a project.
Q2) All of the following are anticipated effects of a proposed project.Which of these should be considered when computing the cash flow for the final year of the project?
A)Operating cash flow and salvage values only
B)Salvage values and net working capital recovery only
C)Operating cash flow,net working capital recovery,salvage values
D)Net working capital recovery and operating cash flow only
E)Operating cash flow only
Q3) For a tax-paying firm,the net present value of a project will increase when:
A)the initial net working capital requirement increases.
B)depreciation is decreased during the early years of a project's life.
C)the life of the fixed assets used by that project is increased.
D)the operating cash flows increase.
E)the tax rate increases.
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Risk Analysis, real Options, and Capital Budgeting
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/65416
Sample Questions
Q1) All else constant,as the variable cost per unit for a project increases,the:
A)contribution margin decreases.
B)sensitivity to fixed costs decreases.
C)project's net present value increases.
D)accounting break-even point decreases.
E)net profit increases.
Q2) If you want the most detailed information possible about the potential outcome of a critical project you should conduct:
A)operating analysis.
B)simulation analysis.
C)financial analysis.
D)decision tree analysis.
E)sensitivity analysis.
Q3) The potential decision to abandon a project has option value because:
A)abandonment can occur at one specific point in the future.
B)a project may be worth more dead than alive.
C)management is locked into a negative outcome.
D)future demand may exceed expectations.
E)the project may be worth more if its commencement is delayed.
Q4) Discuss some potential shortcomings of the standard decision tree analysis.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Interest Rates and Bond Valuation
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/65415
Sample Questions
Q1) The principal amount of a bond that is repaid at the end of the loan term is called the bond's:
A)coupon.
B)face value.
C)maturity.
D)yield to maturity.
E)coupon rate.
Q2) Chocolate and More offers a bond with a coupon rate of 6 percent,semiannual payments,and a yield to maturity of 7.73 percent.The bonds mature in 9 years.What is the market price of a $1,000 face value bond?
A)$889.29
B)$963.88
C)$1,008.16
D)$924.26
E)$901.86
Q3) Interest rate risk is often explained by using the concept of a teeter-totter.Explain interest rate risk and how it is related to the movements of a teeter-totter.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Stock Valuation
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/65414
Sample Questions
Q1) JK Inc.is a very cyclical type of business which is reflected in its dividend policy.The firm pays a dividend of $2.00 a share every other year with the last payment having just been paid.Five years from now,the company is repurchasing all of the outstanding shares at a price of $50 a share.What is the current value of one share at a discount rate of 12 percent?
A)$34.03
B)$31.24
C)$33.78
D)$27.89
E)$34.99
Q2) For a firm with a constant payout ratio,the dividend growth rate can be estimated as:
A)Payout ratio × Return on equity.
B)Return on assets × Retention ratio.
C)Return on equity × (1 + Retention ratio).
D)Payout ratio × Return on assets.
E)Return on retained earnings × Retention ratio.
Q3) Explain whether it is easier to find the required return on a publicly traded stock or a publicly traded bond,and explain why.
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Lessons From Market History
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/65413
Sample Questions
Q1) In estimating the future equity risk premium,it is important to include assumptions about the:
A)historical distribution of returns on derivative securities only.
B)future risk environment only.
C)amount of risk aversion of future investors only.
D)historical distribution of returns on derivative securities and the future risk environment.
E)future risk environment and the amount of risk aversion of future investors.
Q2) From November 2007 through January 2009,the S&P 500 Index lost approximately what percent of its value?
A)37
B)51
C)43
D)33
E)45
Q3) Assume you are comparing two stocks that are identical in every way except that one stock pays dividends and the other does not.How would you expect this difference to affect the annual performance of the dividend-paying stock as compared to the non-dividend-paying stock?
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Return, risk, and the Capital Asset Pricing Model
Capm
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/65412
Sample Questions
Q1) Stock A has a variance of .1428 while Stock B's variance is .0910.The covariance of the returns for these two stocks is .0206.What is the correlation coefficient?
A) .1505
B) .1146
C) .1480
D) .1643
E) .1807
Q2) The principle of diversification tells us that:
A)concentrating an investment in two or three large stocks will eliminate all your risk.
B)concentrating an investment in three companies all within the same industry will greatly reduce your overall risk.
C)spreading an investment across five diverse companies will not lower your overall risk.
D)spreading an investment across many diverse assets will eliminate all the risk.
E)spreading an investment across many diverse assets will eliminate idiosyncratic risk.
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: An Alternative View of Risk and Return: the Arbitrage Pricing Theory
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/65411
Sample Questions
Q1) Parametric or empirical models rely:
A)on security betas explaining systematic factor relationships.
B)on finding regularities and relations in past market data.
C)on security returns always being located on the capital market line.
D)solely on factors within the security's issuing firm's realm of control.
E)primarily on financial market models and theories.
Q2) Consider the security market line (SML)under the one-factor model.Assume Point C lies on the SML but an investor would prefer a point that also lies on the SML but is lower and to the left of Point C.How can this investor obtain that point for their portfolio?
A)Replace the lower beta stocks in the portfolio with higher beta stocks
B)Sell a portion of the portfolio and use the proceeds to purchase undervalued stocks
C)Sell the higher beta stocks in the portfolio and replace them with undervalued stocks
D)Replace the portfolio with undervalued stocks and risk-free assets
E)Replace the portfolio with a combination of a higher beta portfolio that lies on the SML and risk-free assets
Q3) Verbally describe a graph that illustrates the one-factor model.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Risk, cost of Capital, and Valuation
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/65410
Sample Questions
Q1) LR Engines stock is selling for $42.39 a share,has an ROE of 14.3 percent,and a dividend payout ratio of 35 percent.The next expected dividend is $1.62 a share.What is the cost of equity for this firm?
A)12.86 percent
B)13.12 percent
C)13.47 percent
D)12.52 percent
E)13.70 percent
Q2) The beta of debt is commonly considered to be:
A)equal to the market beta.
B)one-half of the equity beta.
C)equal to the asset beta.
D)zero.
E)one.
Q3) An industry is likely to have a low beta if the:
A)stream of revenues within that industry is less volatile than the market.
B)economy is in a recessionary period.
C)market for its goods is highly affected by the market cycle.
D)number of firms within the industry is fairly constant.
E)industry tends to use a lot of debt financing.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Efficient Capital Markets and Behavioral Challenges
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/65409
Sample Questions
Q1) Which one of these is an example of financially irrational behavior?
A)An investor selling stock to realize a profit
B)Increasing the amount you are willing to pay for a stock following a positive announcement
C)Buying a mutual fund to benefit from diversification
D)Casino gambling
E)A firm issuing new shares when their managers feel the stock is overpriced
Q2) Stock market events in 1929,1987,and 2008 are most apt to be used as examples in support of which one of these theories?
A)Blanket theory
B)Advanced markets theory
C)Value theory
D)Bubble theory
E)Behavioral theory
Q3) Market efficiency requires:
A)arbitrage conducted by irrational investors.
B)the absence of arbitrage.
C)speculation by amateur investors.
D)all investors to be rational.
E)countervailing irrationalities.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Long-Term Financing
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/65408
Sample Questions
Q1) Which one of these statements correctly applies to either a leveraged or an unleveraged syndicated loan?
A)The loan will always be rated as investment grade.
B)The loan may not be publicly traded.
C)The loan arranger is not involved with the actual lending.
D)Each bank that participates negotiates the terms for its portion of the overall loan.
E)Each bank has its own loan agreement with the borrowers.
Q2) Which one of these applies to floating-rate bonds?
A)Bondholders can generally redeem their bonds at par at any time.
B)Coupon payments are variable while the par value is fixed.
C)Interest adjustments are accrued and paid on the maturity date.
D)Coupon payments are fixed but the par value is variable.
E)Bondholders frequently are granted a put provision at the current market price.
Q3) Explain the main differences between debt and equity.
Q4) Identify three key duties of a bond trustee.
Q5) Identify the general rights that are commonly granted to common stock shareholders.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Capital Structure: Basic Concepts
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/65407
Sample Questions
Q1) Wild Flowers Express has a debt-equity ratio of .60.The pretax cost of debt is 9 percent while the unlevered cost of capital is 14 percent.What is the cost of equity if the tax rate is 23 percent?
A)7.52 percent
B)8.78 percent
C)16.31 percent
D)16.83 percent
E)17.30 percent
Q2) A levered firm is a company that has:
A)accounts payable as its only liability.
B)some debt in its capital structure.
C)an all-equity capital structure.
D)a tax loss carry forward.
E)taxable income.
Q3) The firm's capital structure refers to the:
A)mix of current and fixed assets a firm holds.
B)amount of capital invested in the firm.
C)amount of dividends a firm pays.
D)mix of debt and equity used to finance the firm's assets.
E)amount of cash versus receivables the firm holds.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Capital Structure: Limits to the Use of Debt
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/65406
Sample Questions
Q1) Which one of the following is not implied by the pecking order theory?
A)Profitable firms tend to use less debt than unprofitable firms.
B)Companies like having financial slack.
C)Companies prefer to borrow up to the point where the financial distress costs offset the tax benefit of debt.
D)There is no target debt-equity ratio for a firm.
E)Firms tend to accumulate cash in anticipation of future projects.
Q2) The Supply Depot is considering issuing $1 million in bonds but their financial staff has advised that if they do,the value of the firm will decrease.Given this advice,you know the staff believes the firm:
A)currently is all-equity financed and adding debt will cause a decrease in firm value.
B)wants to issue too few bonds to obtain the most benefit from debt.
C)will suffer from a decrease in its WACC if the bonds are issued.
D)is at,or has exceeded,its optimal debt-equity ratio.
E)will realize greater tax benefits by issuing equity securities.
Q3) What is the pecking order theory and what are the implications that arise from this theory?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Valuation and Capital Budgeting for the Levered Firm
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/65405
Sample Questions
Q1) If you discount a project's expected future unlevered aftertax cash flows by the ________ and then subtract the initial investment you will calculate the:
A)cost of capital for the unlevered firm; adjusted present value.
B)cost of equity capital; project NPV.
C)weighted cost of capital; project NPV.
D)cost of capital for the unlevered firm; all-equity net present value.
E)cost of equity capital for the levered firm; all-equity net present value.
Q2) Given the all-equity cost of capital,the cost of levered equity can be computed as:
A)R<sub>S</sub> = (B/S)(R<sub>0</sub>)+ (1 t<sub>C</sub>)B.
B)R<sub>S</sub> = R<sub>0</sub> + (B/S)(1 t<sub>C</sub>)(R<sub>0</sub>
R<sub>B</sub>).
C)R<sub>S</sub> = R<sub>0</sub> + (1 t<sub>C</sub>)B.
D)R<sub>0</sub> = R<sub>s</sub> + (B/S)(1 t<sub>C</sub>)(R<sub>0</sub> R<sub>B</sub>).
E)R<sub>0</sub> = R<sub>s</sub> + (1 t<sub>C</sub>)B.
Q3) Explain why the flow to equity approach uses levered,not unlevered,cash flows.
Q4) Assume a project is non-scale enhancing.Describe the basic steps required to determine the net present value of the project.
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Dividends and Other Payouts
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/65404
Sample Questions
Q1) Explain the general characteristics of a tender offer.
Q2) You purchased 200 shares of ABC stock on July 15th.On July 20th,you purchased another 100 shares and then on July 22nd you purchased your final 200 shares of ABC stock.The company declared a dividend of $1.10 a share on July 5th to holders of record on Friday,July 23rd.The dividend is payable on July 31st.How much dividend income will you receive on July 31st from ABC?
A)$0
B)$220
C)$330
D)$440
E)$550
Q3) The market's reaction to the announcement of a change in the firm's dividend payout is referred to as the:
A)information content effect.
B)clientele effect.
C)efficient markets hypothesis.
D)MM Proposition I.
E)MM Proposition II.
Q4) Explain why an ex-dividend date is a required step in the dividend payout process.
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Raising Capital
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/65403
Sample Questions
Q1) All the following are major requirements needed to qualify for shelf registration except:
A)having a current rating of investment grade.
B)having outstanding stock with a market value in excess of $150 million.
C)not defaulting on debt in the past three years.
D)having no violations of the Securities Act of 1933 in the past three years.
E)having no violations of the Securities Exchange Act of 1934 in the past three years.
Q2) A red herring contains:
A)exactly the same information as the final prospectus except for the SEC approval.
B)the same information as the final prospectus.
C)only a brief synopsis of the final prospectus.
D)only a description of how the funds raised will be used.
E)information very similar to the final prospectus but excludes the selling price.
Q3) Identify and explain the key differences between public issues of debt and direct private long-term debt financing.
Q4) Discuss what a Dutch auction is and how it works.
Q5) Discuss the stages of venture capital financing,defining each in detail.
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 21: Leasing
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/65402
Sample Questions
Q1) An operating lease generally:
A)has a term that exceeds the economic life of the leased asset.
B)is fully amortized.
C)cannot be cancelled.
D)requires the lessee to return the leased asset to the lessor if the lease is cancelled.
E)requires the lessee to maintain the leased asset.
Q2) Reed Machinery just signed a capital lease agreement with a present value of $260,000.How would this lease first appear on Reed Machinery's balance sheet?
A)Capital leases do not appear on the balance sheet.
B)Assets under capital lease $260,000; Obligations under capital lease $260,000
C)Assets under capital lease $130,000; Obligations under capital lease $130,000
D)Assets under capital lease $260,000; Retained earnings committed to leases $260,000
E)Assets under capital lease $130,000; Retained earnings committed to leases $130,000
Q3) Discuss some of the pros and cons of leasing.
Q4) Explain the characteristics of both operating and financial leases.
To view all questions and flashcards with answers, click on the resource link above.
Page 23
Chapter 22: Options and Corporate Finance
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/65401
Sample Questions
Q1) You own one call option with an exercise price of $30 on Nadia stock.This stock is currently selling for $27.80 a share but is expected to increase to either $28 or $34 a share over the next year.The risk-free rate of return is 5 percent.What is the current per share value of your option if it expires in one year?
A)$.76
B)$.79
C)$.89
D)$.92
E)$.95
Q2) Put-call parity can be used to show:
A)how far in-the-money put options can be.
B)how far in-the-money call options can be.
C)the precise relationship between put and call prices given equal exercise prices and equal expiration dates.
D)that the value of a call option is always twice that of a put given equal exercise prices and equal expiration dates.
E)that the value of a call option is always half that of a put given equal exercise prices and equal expiration dates.
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Options and Corporate Finance: Extensions and Applications
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/65400
Sample Questions
Q1) Which one of these statements is true?
A)If virtually all projects have embedded options,then ignoring these options does not affect the value of the projects.
B)Every business will benefit if it exercises its expansion option.
C)The option to abandon a project lowers the project's value.
D)Start-up businesses do not have any options until they have succeeded for one year.
E)Every business idea has at least two possible outcomes.
Q2) If an infinite number of intervals is applied to the binomial option pricing model,then the value of a call is equal to:
A)the risk-free rate of return.
B)zero.
C)the exercise price.
D)the Black-Scholes model's call value.
E)the stock price.
Q3) Why is straight NPV analysis flawed as compared to models that include option pricing in the analysis?
Q4) In what instances is the binomial option pricing model superior to the Black-Scholes option pricing model?
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 24: Warrants and Convertibles
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/65399
Sample Questions
Q1) Outer Wear has 12,000 shares of stock outstanding.Each share has a .5 warrant attached.These warrants expire today.The market value of the firm's assets net of its debt is $192,000.One new share can be obtained for one warrant plus $18.Assuming all else held constant,what would you expect the market price per share to be tomorrow morning when the stock market opens?
A)$16.67
B)$15.33
C)$16.00
D)$18.00
E)$17.50
Q2) A firm has experienced a significant increase in its share value.In retrospect,which one of the following securities would generally have provided the most benefit to the firm assuming the securities had been issued prior to the change in share value?
A)Bonds with attached warrants
B)Convertible preferred stock
C)Straight bonds
D)Convertible bonds
E)Common stock
Q3) Explain how a noncallable convertible bond's value is determined.
To view all questions and flashcards with answers, click on the resource link above.
Page 26
Chapter 25: Derivatives and Hedging Risk
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/65398
Sample Questions
Q1) Assume you write a futures contract on corn at $3.74 per bushel.Over the next 5 days the contract settles at $3.68,$3.71,$3.67,$3.64,and $3.61.Before you can reverse your position in the futures market you are notified to complete delivery on Day 5.What will you receive on delivery per bushel and what is the net amount per bushel you receive in total?
A)$3.74; $.13
B)$3.74; $.13
C)$3.64; $3.74
D)$3.61; $3.61
E)$3.61; $3.74
Q2) Last week,you sold a futures contract on 5,000 troy ounces of silver at a settle price of $16.59.Today,you made delivery and the daily settle price was $16.62.What amount will you receive at the time of delivery? Assume yesterday's settle price was $16.66.
A)$82,950
B) $200
C)$300
D)$83,100
E)$83,300
Q3) Explain why credit default swaps act like an insurance policy.
To view all questions and flashcards with answers, click on the resource link above.
Page 27
Chapter 26: Short-Term Finance and Planning
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/65397
Sample Questions
Q1) Wilson's Dry Goods has a line of credit with a local bank for $250,000.The loan agreement calls for interest of 7.6 percent with a compensating balance requirement of 5 percent,which is based on the total amount borrowed.What is the effective interest rate if the firm needed $138,000 for one year to cover its expansion costs?
A)8.55 percent
B)7.60 percent
C)8.13 percent
D)8.38 percent
E)8.00 percent
Q2) Alpha Companies has an operating cycle of 328 days,a receivables period of 64 days,and a payables period of 98 days.If the firm revises its credit policy,it believes it can reduce its receivables period by 9 days.Given this revision,what will be the firm's new cash cycle?
A)239 days
B)241 days
C)230 days
D)221 days
E)218 days
To view all questions and flashcards with answers, click on the resource link above.
Chapter 27: Cash Management
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/65396
Sample Questions
Q1) Which one of these probably has reduced collection time the most?
A)Traditional lockboxes
B)Concentration accounts
C)Financial EDI
D)Zero-balance accounts
E)Depository transfer checks
Q2) Which one of the following is the best means of managing disbursements from an ethical,business,and economic point of view?
A)Purposely mailing checks without a signature as a means of delaying payment
B)Delaying paying suppliers until 30 days past the due date of each invoice
C)Purposely mailing payments to suppliers from locations that maximize mailing time
D)Taking early payment discounts while paying bills after their due dates
E)Funding your bank account with the minimum amount needed to pay bills in a timely manner
Q3) Mail float
Q4) Explain repurchase agreements and the role they can play in a firm's everyday operations.
Q5) Mail float; time that elapses while a payment is in the mail system
Q6) Processing float
To view all questions and flashcards with answers, click on the resource link above.
Chapter 28: Credit and Inventory Management
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/65395
Sample Questions
Q1) Edgeworth Co.has an all-cash policy and sells 50 units per month at $920 a unit.The variable cost is $700 a unit.Should the firm grant 30 days of credit,it expects its sales would rise to 60 units without changes to price or costs per unit.The monthly required return is .75 percent.What is the NPV of switching to a credit policy?
A)$266,667
B)$346,333
C)$366,667
D)$240,333
E)$258,778
Q2) The first step in materials requirements planning is establishing the:
A)desired minimum raw materials inventory level.
B)finished goods inventory level.
C)cost of each order.
D)delivery time required for each type of raw material.
E)value of each inventory item as a percent of total inventory.
Q3) Identify several factors that affect the length of the credit period and provide an explanation of each.
Q4) Explain how inventory is managed under an ABC inventory system.
Q5) Explain the purpose of a safety stock and how this relates to reorder points.
To view all questions and flashcards with answers, click on the resource link above. Page 30
Chapter 29: Mergers,acquisitions,and Divestitures
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/65394
Sample Questions
Q1) The acquisition of a firm in the same industry as the bidder is called a ________ acquisition.
A)conglomerate
B)forward
C)backward
D)horizontal
E)vertical
Q2) The IRS is most apt to disallow an acquisition if it:
A)moves the foreign operations of the acquired firm to the U.S.
B)is totally financed with debt.
C)is designed primarily to reduce federal taxes.
D)is designed to transfer technology in a tax-free transfer.
E)allows shareholders to avoid currently realizing their gains from a stock acquisition.
Q3) When evaluating an acquisition,you should:
A)concentrate on book values and ignore market values.
B)focus on the total cash flows of the merged firm.
C)include synergies.
D)ignore any one-time acquisition fees or transaction costs.
E)ignore any potential changes in management.
To view all questions and flashcards with answers, click on the resource link above.
Page 31
Chapter 30: Financial Distress
Available Study Resources on Quizplus for this Chatper
41 Verified Questions
41 Flashcards
Source URL: https://quizplus.com/quiz/65393
Sample Questions
Q1) Uptown Cleaners is being liquidated.The building has been sold for a net of $670,000 but the mortgage due is $738,000.The remaining assets were sold with net proceeds of $154,000.Administrative costs,wages and benefits,and consumer claims equal $136,000.The firm also owes $58,000 in taxes.The secured claims total $46,000 and the unsecured claims are $138,000.What percentage of their total claims will the secured creditors be paid?
A)11.2 percent
B)8.8 percent
C)0 percent
D)41.2 percent
E)39.1 percent
Q2) A firm in financial distress that reorganizes through the bankruptcy process:
A)will continue to operate as a going concern throughout the entire process.
B)must only have the reorganization plan approved by its primary creditor.
C)cannot issue new securities to either creditors or shareholders.
D)must file a reorganization plan within 90 days of filing the bankruptcy petition.
E)must abide by the Section 363 provisions of Chapter 11.
Q3) There are a number of ways firms can deal with financial distress.Identify at least 5 of these.
To view all questions and flashcards with answers, click on the resource link above.
Page 32
Chapter 31: International Corporate Finance
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/65392
Sample Questions
Q1) A foreign subsidiary can remit funds to the parent firm in the all the following ways except by means of:
A)dividends.
B)management fees for central services.
C)royalties on the use of trade names.
D)royalties on the use of patents.
E)nationalization.
Q2) Angie has been offered Can$1.75 for £1.How much profit can she earn on a triangle arbitrage if the official rate is $1 = Can$1.2834 and the USD equivalent of £1 is $1.3699?
Assume she currently has $100 in cash.
A)$.46
B)$.73
C)$1.09
D)$1.37
E)$.57
Q3) Explain the difference between a spot trade and a forward trade as they relate to currencies.
Q4) What is triangle arbitrage?
To view all questions and flashcards with answers, click on the resource link above.
33