FIN 534_FINAL_2016_LATEST (PART 2)

·        
Question 1

2 out of 2 points









Which
of the following is NOT normally regarded as being a barrier to hostile
takeovers?







 

·        
Question 2

2 out of 2 points









Which
of the following is NOT normally regarded as being a good reason to establish
an ESOP?







·        
Question 3

2 out of 2 points









Which
of the following statements is NOT correct?







 

·        
Question 4

2 out of 2 points









Consider
two very different firms, M and N. Firm M is a mature firm in a mature
industry. Its annual net income and net cash flows are both consistently high
and stable. However, M's growth prospects are quite limited, so its capital
budget is small relative to its net income. Firm N is a relatively new firm
in a new and growing industry. Its markets and products have not stabilized, so
its annual operating income fluctuates considerably. However, N has
substantial growth opportunities, and its capital budget is expected to be
large relative to its net income for the foreseeable future. Which of the
following statements is correct?
 







·        
Question 5

2 out of 2 points









In
the real world, dividends







 

·        
Question 6

2 out of 2 points









Which
of the following statements is correct?







·        
Question 7

2 out of 2 points









The
capital budget of Creative Ventures Inc. is $1,000,000. The company wants to
maintain a target capital structure that is 30% debt and 70% equity. The
company forecasts that its net income this year will be $800,000. If the
company follows a residual dividend policy, what will be its total dividend
payment?







 

·        
Question 8

2 out of 2 points









Which
of the following statements is correct?







 

·        
Question 9

2 out of 2 points









Which
of the following statements is correct?







 

·        
Question 10

2 out of 2 points









Which
of the following statements best describes the optimal capital structure? The
optimal capital structure is the mix of debt, equity, and preferred stock
that maximizes the company's ____.







·        
Question 11

2 out of 2 points









Companies
HD and LD have identical tax rates, total assets, and basic earning power
ratios, and their basic earning power exceeds their before-tax cost of debt,
rd. However, Company HD has a higher debt ratio and thus more interest
expense than Company LD. Which of the following statements is CORRECT?







·        
Question 12

2 out of 2 points









Which
of the following statements is CORRECT?







·        
Question 13

2 out of 2 points









Based
on the information below for Benson Corporation, what is the optimal capital
structure?

















 

·        
Question 14

2 out of 2 points









Which
of the following statements is CORRECT?







·        
Question 15

2 out of 2 points









Which
of these items will not generally be affected by an increase in the debt
ratio?







·        
Question 16

2 out of 2 points









Daylight
Solutions is considering a recapitalization that would increase its debt
ratio and increase its interest expense. The company would issue new bonds
and use the proceeds to buy back shares of its common stock. The company's
CFO thinks the plan will not change total assets or operating income, but
that it will increase earnings per share (EPS). Assuming the CFO's estimates
are correct, which of the following statements is CORRECT?







·        
Question 17

2 out of 2 points









Which
of the following actions should Reece Windows take if it wants to reduce its
cash conversion cycle?







·        
Question 18

2 out of 2 points









Which
of the following items should a company report directly in its monthly cash
budget?







·        
Question 19

2 out of 2 points









Which
of the following statements is most consistent with efficient inventory
management? The firm has a







·        
Question 20

2 out of 2 points









Which
of the following is NOT commonly regarded as being a credit policy variable?







·        
Question 21

2 out of 2 points









A
lockbox plan is most beneficial to firms that







·        
Question 22

2 out of 2 points









Firms
generally choose to finance temporary current operating assets with
short-term debt because







 

·        
Question 23

2 out of 2 points









In
1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200.
If the car still sold for the same amount of yen today but the current
exchange rate is 144 yen per dollar, what would the car be selling for today
in U.S. dollars?







·        
Question 24

2 out of 2 points









In
Japan, 90-day securities have a 4% annualized return and 180-day securities
have a 5% annualized return. In the United States, 90-day securities have a
4% annualized return and 180-day securities have an annualized return of
4.5%. All securities are of equal risk, and Japanese securities are
denominated in terms of the Japanese yen. Assuming that interest rate parity
holds in all markets, which of the following statements is most CORRECT?







·        
Question 25

2 out of 2 points









If
the inflation rate in the United States is greater than the inflation rate in
Britain, other things held constant, the British pound will







·        
Question 26

2 out of 2 points









Suppose
1 U.S. dollar equals 1.60 Canadian dollars in the spot market. 6-month
Canadian securities have an annualized return of 6% (and thus a 6-month periodic
return of 3%). 6-month U.S. securities have an annualized return of 6.5% and
a periodic return of 3.25%. If interest rate parity holds, what is the U.S.
dollar-Canadian dollar exchange rate in the 180-day forward market?







·        
Question 27

2 out of 2 points









Suppose
one U.S. dollar can purchase 144 yen today in the foreign exchange market. If
the yen depreciates by 8.0% tomorrow, how many yen could one U.S. dollar buy
tomorrow?







·        
Question 28

2 out of 2 points









Suppose
that 1 British pound currently equals 1.62 U.S. dollars and 1 U.S. dollar
equals 1.62 Swiss francs. What is the cross exchange rate between the pound
and the franc?







·        
Question 29

2 out of 2 points









Which
of the following is NOT a reason why companies move into international
operations?







·        
Question 30

2 out of 2 points









Suppose
a foreign investor who holds tax-exempt Eurobonds paying 9% is considering
investing in an equivalent-risk domestic bond in a country with a 28%
withholding tax on interest paid to foreigners. If 9% after-tax is the
investor's required return, what before-tax rate would the domestic bond need
to pay to provide the required after-tax return?








  • Question 1



2 out of 2
points









Which of the following is NOT
normally regarded as being a good reason to establish an ESOP?








  • Question 2



2 out of 2
points









Which of the following is NOT
normally regarded as being a barrier to hostile takeovers?








  • Question 3



2 out of 2
points









Rohter Galeano Inc. is considering
how to set its dividend policy. It has a capital budget of $3,000,000. The
company wants to maintain a target capital structure that is 15% debt and 85%
equity. The company forecasts that its net income this year will be
$3,500,000. If the company follows a residual dividend policy, what will be
its total dividend payment?








  • Question 4



2 out of 2
points









Which of the following statements
is CORRECT?








  • Question 5



2 out of 2
points









Which of the following statements
is correct?








  • Question 6



2 out of 2
points









Which of the following statements
is NOT correct?








  • Question 7



2 out of 2
points









Grandin Inc. is evaluating its
dividend policy. It has a capital budget of $625,000, and it wants to
maintain a target capital structure of 60% debt and 40% equity. The company
forecasts a net income of $475,000. If it follows the residual dividend
policy, what is its forecasted dividend payout ratio?








  • Question 8



2 out of 2
points









The projected capital budget of
Kandell Corporation is $1,000,000, its target capital structure is 60% debt
and 40% equity, and its forecasted net income is $550,000. If the company
follows a residual dividend policy, what total dividends, if any, will it pay
out?








  • Question 9



2 out of 2
points









If a firm adheres strictly to the
residual dividend policy, the issuance of new common stock would suggest that








  • Question 10



2 out of 2
points









Firms U and L both have a basic
earning power ratio of 20% and each has the same amount of assets. Firm U is
unleveraged, i.e., it is 100% equity financed, while Firm L is financed with
50% debt and 50% equity. Firm L's debt has a before-tax cost of 8%. Both
firms have positive net income. Which of the following statements is CORRECT?








  • Question 11



2 out of 2
points









Companies HD and LD have identical
tax rates, total assets, and basic earning power ratios, and their basic
earning power exceeds their before-tax cost of debt, rd. However, Company HD
has a higher debt ratio and thus more interest expense than Company LD. Which
of the following statements is CORRECT?








  • Question 12



2 out of 2
points









Which of these items will not
generally be affected by an increase in the debt ratio?








  • Question 13



2 out of 2
points









Which of the following statements
is CORRECT?








  • Question 14



2 out of 2
points









Which of the following is NOT
associated with (or does not contribute to) business risk? Recall that
business risk is affected by a firm's operations.








  • Question 15



2 out of 2
points









Which of the following statements
is CORRECT?








  • Question 16



2 out of 2
points









Barette Consulting currently has
no debt in its capital structure, has $500 million of total assets, and its
basic earning power is 15%. The CFO is contemplating a recapitalization where
it will issue debt at a cost of 10% and use the proceeds to buy back shares of
the company's common stock, paying book value. If the company proceeds with
the recapitalization, its operating income, total assets, and tax rate will
remain unchanged. Which of the following is most likely to occur as a result
of the recapitalization?








  • Question 17



2 out of 2
points









A lockbox plan is most beneficial
to firms that








  • Question 18



2 out of 2
points









Which of the following actions
would be likely to shorten the cash conversion cycle?








  • Question 19



2 out of 2
points









Which of the following statements
is most consistent with efficient inventory management? The firm has a








  • Question 20



2 out of 2
points









Which of the following actions
should Reece Windows take if it wants to reduce its cash conversion cycle?








  • Question 21



2 out of 2
points









Which of the following items
should a company report directly in its monthly cash budget?








  • Question 22



2 out of 2
points









Other things held constant, which
of the following would tend to reduce the cash conversion cycle?








  • Question 23



2 out of 2
points









In Japan, 90-day securities have a
4% annualized return and 180-day securities have a 5% annualized return. In
the United States, 90-day securities have a 4% annualized return and 180-day
securities have an annualized return of 4.5%. All securities are of equal
risk, and Japanese securities are denominated in terms of the Japanese yen.
Assuming that interest rate parity holds in all markets, which of the
following statements is most CORRECT?








  • Question 24



2 out of 2
points









If 1.64 Canadian dollars can
purchase one U.S. dollar, how many U.S. dollars can you purchase for one
Canadian dollar?








  • Question 25



2 out of 2
points









Suppose one U.S. dollar can
purchase 144 yen today in the foreign exchange market. If the yen depreciates
by 8.0% tomorrow, how many yen could one U.S. dollar buy tomorrow?








  • Question 26



2 out of 2
points









A box of chocolate candy costs
28.80 Swiss francs in Switzerland and $20 in the United States. Assuming that
purchasing power parity (PPP) holds, what is the current exchange rate?








  • Question 27



2 out of 2
points









Suppose it takes 1.82 U.S. dollars
today to purchase one British pound in the foreign exchange market, and
currency forecasters predict that the U.S. dollar will depreciate by 12.0%
against the pound over the next 30 days. How many dollars will a pound buy in
30 days?








  • Question 28



2 out of 2
points









Suppose 1 U.S. dollar equals 1.60
Canadian dollars in the spot market. 6-month Canadian securities have an
annualized return of 6% (and thus a 6-month periodic return of 3%). 6-month
U.S. securities have an annualized return of 6.5% and a periodic return of
3.25%. If interest rate parity holds, what is the U.S. dollar-Canadian dollar
exchange rate in the 180-day forward market?








  • Question 29



2 out of 2
points









In 1985, a given Japanese imported
automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the
same amount of yen today but the current exchange rate is 144 yen per dollar,
what would the car be selling for today in U.S. dollars?








  • Question 30



2 out of 2
points









Which of the following is NOT a
reason why companies move into international operations?





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