BUSI 530 Corporate Finance Exam 2 Help

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BUSI 530 Corporate Finance Exam 2 Help

corporate finance assignment help1Q1. The APR on a loan must be equal to the effective annual rate when:

  • compounding occurs monthly.
  • compounding occurs annually.
  • the loan is for less than one year.
  • the loan is for more than one year.

Q2. The concept of compound interest refers to:

  • earning interest on the original investment.
  • payment of interest on previously earned interest.
  • investing for a multiyear period of time.
  • determining the APR of the investment.

Q3. What is the APR on a loan that charges interest at the rate of 1.4% per month?

  • 10.20%
  • 14.00%
  • 16.80%
  • 18.16%

Q4. The more frequent the compounding, the higher the future value, other things equal.

  • True
  • False

Q5. What is the minimum nominal rate of return that you should accept if you require a 4% real rate of return and the rate of inflation is expected to average 3.5% during the investment period?

  • 7.36%
  • 7.50%
  • 7.64%
  • 8.01%

Q6. When a bond matures, the issuer repays the bond’s face value.

  • True
  • False

Q7. What is the yield to maturity for a bond paying $100 annually that has 6 years until maturity and sells for $1,000?

  • 6.0%
  • 8.5%
  • 10.0%
  • 12.5%

Q8. When the yield curve is upward-sloping, then:

  • short-maturity bonds offer the highest coupon rates.
  • long-maturity bonds are priced above par value.
  • short-maturity bonds yield less than long-maturity bonds.
  • long-maturity bonds increase in price when interest rates increase.

Q9. Which of these bond ratings is the lowest of Moody’s investment-grade ratings?

  • A
  • Ba
  • Aa
  • Baa

Q10. What are the conditions imposed on a debt issuer that are designed to protect bondholders ?

  • Collateral agreements
  • Vanilla wrappers
  • Protective covenants
  • Default provisions

Q11. If it proves possible to make abnormal profits based on information regarding past stock prices, then the market is:

  • weak-form efficient.
  • not weak-form efficient.
  • semi strong-form efficient.
  • strong-form efficient.

Q12. What should be the price of a stock that offers a $4.32 annual dividend with no prospects of growth, and has a required return of 12.5%?

  • $0
  • $4.86
  • $34.56
  • $30.24

Q13. A company with a return on equity of 15% and a plowback ratio of 60% would expect a constant-growth rate of:

  • 4%
  • 9%
  • 21%
  • 25%

Q14. Which of the following values treats the firm as a going concern?

  • Market value
  • Book value
  • Liquidation value
  • Both market and book values

Q15. If the market is efficient, stock prices should be expected to react only to new information.

  • True
  • False

Q16. When using a profitability index to select projects, a high value is preferred over a low value.

  • True
  • False

Q17. Projects with an NPV of zero decrease shareholders’ wealth by the cost of the project.

  • True
  • False

Q18. Which one of the following changes will increase the NPV of a project?

  • A decrease in the discount rate
  • A decrease in the size of the cash inflows
  • An increase in the initial cost of the project
  • A decrease in the number of cash inflows

Q19. A risky dollar is worth more than a safe one.

  • True
  • False

Q20. As the discount rate is increased, the NPV of a specific project will:

  • increase
  • decrease
  • remain constant
  • decrease to zero, then remain constant.

Q21. Which one of the following changes in working capital is least likely if sales increase?

  • An increase in inventories
  • An increase in accounts payable
  • A decrease in accounts receivable
  • An increase in notes payable

Q22. Corporate income statements are designed primarily to show:

  • cash flows during a period.
  • account balances at the end of a period.
  • performance during a period.
  • market values of assets and liabilities.

Q23. A tax shield is equal to the reduction in a firm’s:

  • total tax liability resulting from a tax deductible expense.
  • taxable income resulting from depreciation.
  • taxable income resulting from a decrease in long-term debt.
  • net income caused by depreciation.

Q24. Which of the following statements regarding investment in working capital is incorrect?

  • An investment in working capital, unlike an investment in plant and equipment, represents a positive cash flow when the investment is made.
  • Net working capital cash flow is measured by the change in working capital, not the level of working capital.
  • Net working capital may change during the life of a project.
  • Working capital is generally recovered at the end of a project.

Q25. The statement “We’ve got too much invested in that project to pull out now” possibly illustrates the need to:

  • switch to an accelerated method of depreciation.
  • recognize sunk costs.
  • reduce net working capital assigned to the project.
  • reduce discount rates to improve NPV.

Q26. A capital budget shows a proposed list of investments.

  • True
  • False

Q27. If sensitivity analysis concludes that the largest impact on profits would come from changes in the sales level, then:

  • fixed costs should be traded for variable costs.
  • variable costs should be traded for fixed costs.
  • the project should not be undertaken.
  • additional marketing analysis may be beneficial before proceeding.

Q28. Which one of the following appears to be a more likely result from using sensitivity analysis?

  • Agreement on the appropriate discount rate
  • Determination of whether to finance with debt or equity
  • Isolation of the pivotal factor in project profitability
  • Selection of the best capital budgeting project

Q29. “What-if” questions ask what will happen to a project in various circumstances.

  • True
  • False

Q30. Which of the following correctly describes sensitivity analysis?

  • recalculation of project NPV by changing several inputs to new but consistent values.
  • measures the degree to which fixed costs magnify the effect on profits of a shortfall in sales.
  • analysis of how project NPV changes if different assumptions are made about key variables.
  • measures the future level of sales at which NPV equals zero.

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