FIN 571 Final Exam Ver 2

In this paperwork of FIN 571 Final Exam Ver 2 you will find the answers on the next questions:

1) Which of the following statements is true?

2) Book value, or net book value, refers to

3) Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true?

4) If the yield to maturity for a bond is less than the bond’s coupon rate, the market value of the bond is __________

5) For investors, the proper measure of a stock’s risk is its __________

6) A company’s beta is -1.5. If the overall stock market decreases by 5%, what is the expected change in the firm’s stock price?

7) Which of these investments would you expect to have the highest rate of return for the next 20 years?

9) One problem with using negative values for the proportion invested in the riskless asset to represent a borrowed amount is that the implied borrowing rate of interest is the same as the __________.

10) If you were willing to bet that the overall stock market was heading up on a sustained basis, it would be logical to invest in

11) Stony Products has an inventory conversion period (ICP) of about 70 days. The receivables collection period (RCP) is 30 days. The payables deferral period (PDP) is about 40 days. What is Stony’s cash conversion cycle (CCC)?

12) The main source of short-term operating capital is _________

13) An investor’s risky portfolio is made up of individual stocks. Which of the following statements about this portfolio is true?

14) An all-equity-financed firm would __________.

15) If a firm wants to lower its weighted average cost of capital (WACC), one way to do so would be to

16) Boeing® is a world leader in commercial aircraft. In the face of competition, Boeing® often faces a critical __________ decision: whether to develop a new generation of passenger aircraft

17) Ideas for capital budgeting projects come from all levels within an organization. The bottom-up process results in ideas moving __________ through the organization

18) Which of the following statements is true?

19) In practice, the __________ rule is the preferred criteria to accept or reject a capital investment project

20) The Jerome Inc. western regional branch has been looking to install a new distribution center. The analysts have run the numbers on the distribution center costs and annual inflow from the investment. The project will cost $5 million at the beginning of the first year. The project will generate $1 million in earnings before interest and taxes at the end of each year. Jerome is in the 35% tax bracket and annual depreciation equates to $500,000 per year. The distribution center’s end

of the fifth year’s salvage equals its book value, or $2,500,000. Compute the project’s NPV, assuming Jerome’s WACC equals 12%.

21) The __________ method breaks down when evaluating projects in which the sign of the cash flow changes

22) Studies show systematic differences in capital structures across industries. These are due primarily to differences in __________

23) Capital structure decisions refer to the

24) Which of the following statements concerning preferred stock is true?

25) Mortgage bonds are __________

26) __________ says to calculate the net advantage of leasing based on the incremental after-tax benefits that leasing will provide

27) From the lessee’s viewpoint, the relevant discount rate for evaluating a lease versus buy decision is the __________

28) The wholesale price for Captain John’s is $0.612 per loaf, and the variable cost of production is $0.387 per loaf. Captain John’s expects that expansion will allow them to sell an additional 4.5 million loaves in the next 5 years. What additional revenues minus expenses will be generated from expansion?

29) Which of the following statements is true?

30) In efficient markets, as in the United States, market prices are not expected to be __________

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