HELP Me With MCQ For Corp FIN
A stakeholder is
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all of these.
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any governmental agancy.
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anyone geographically close to the firm’s headquarters.
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anyone with a claim on the cash flows of the firm.
Current liabilities are liabilities that
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will be converted to equity within a year.
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will be converted to cash within a year.
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must be paid within a year.
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none of these.
Which of the following reports directly to the owners of the firm (assume the firm is a public corporation)
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CEO
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board of directors
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audit committee
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CFO
The generally accepted accounting principles (GAAP) are
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rules for how a company can issue stock to raise money.
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rules that outline how a firm can operate ethically.
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rules on how the firm will be valued in the event of a merger.
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rules and procedures that define how companies are to maintain financial records and prepare financial reports.
Your uncle, who has a second home in Bethany Beach, Delaware, is planning to sell it in the next few weeks. You are interested in buying this beachside property, so your agent negotiates a price for the house with your uncle’s agent. This transaction is an example of
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the assumption of arm’s-length transactions.
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the realization principle.
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the matching principle.
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the going-concern assumption.
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the cost principle.
Dell Computer Corporation has receivables of $2.5 million and inventory worth $1.8 million. The firm plans to borrow $2 million for working capital purposes from Austin First National Bank. In evaluating the loan request, the bank should place the most emphasis on
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the realization principle.
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the matching principle.
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the going-concern assumption.
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the assumption of arm’s-length transactions.
Tyson Corporation bought raw materials on April 23, 2008 and also on July 2, 2008. Products produced in the months of May were sold in July. The firm uses FIFO to value its inventory. According to the matching principle, the firm’s accountant should associate
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Neither of these dates is valid because the products were sold in July.
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none of these.
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the inventory acquired on April 23 with the products sold.
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the inventory acquired on July 2 with the products sold.
The time value of money refers to the issue of
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what the value of the stream of future cash flows is today.
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none of these.
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why a dollar received tomorrow is worth the same as a dollar received today.
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why a dollar received tomorrow is worth more than a dollar received today.
Using higher discount rates will
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not affect the present value of the future cash flow.
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increase the present value of any future cash flow.
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decrease the present value of any future cash flow.
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none of these.
Your aunt is looking to invest a certain amount today. Which of the following choices should she opt for?
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three-year CD at 7% annual rate
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three-year CD at 6.5% annual rate
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three-year CD at 6.75% annual rate
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three-year CD at 6.25% annual rate
Which ONE of the following statements is true about amortization?
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A loan amortization schedule is just a table that shows the loan balance at the beginning and end of each period, the payment made during that period, and how much of that payment represents interest and how much represents repayment of principal.
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With an amortized loan, each loan payment contains some payment of principal and an interest payment.
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Amortization refers to the way the borrowed amount (principal) is paid down over the life of the loan.
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All of these are true.
Which ONE of the following statements is true about amortization?
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A loan amortization schedule is just a table that shows the loan balance at the beginning and end of each period, the payment made during that period, and how much of that payment represents interest and how much represents repayment of principal.
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With an amortized loan, each loan payment contains some payment of principal and an interest payment.
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Amortization refers to the way the borrowed amount (principal) is paid down over the life of the loan.
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All of these are true.
The true cost of lending is the
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annual percentage rate.
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quoted interest rate.
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effective annual rate.
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none of these.
Which one of the following statements is NOT true?
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You can find the interest rate per period by dividing the quoted annual rate by the number of compounding periods.
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The APR is the annualized interest rate using simple interest.
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The correct way to annualize an interest rate is to compute the annual percentage rate (APR).
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The correct way to annualize an interest rate is to compute the effective annual interest rate (EAR).
If you are dealing with percentage returns, then which of the following is generally true?
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None of these is generally true.
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The variance of the return distribution is generally smaller than the standard deviation.
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The variance of the return distribution is measured in the same units as expected return.
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The variance of the return distribution is generally larger than the standard deviation.
The return distribution for an asset is as shown in the following table. What are the missing values if the expected return is 10 percent?
Return
Probability
0.1
0.25
X
0.5
X
0.25
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None of these
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0.20
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0.10
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0.15
Moshe purchased a stock for $30 last year. He found out today that he had a –100 percent return on his investment. Which of the following must be true?
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a) The stock is worth $30 today.
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b) The stock is worth $0 today.
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c) The stock paid no dividends during the year.
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d) Both b and c must be true.
Moshe purchased a stock for $30 last year. He found out today that he had a –100 percent return on his investment. Which of the following must be true?
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a) The stock is worth $30 today.
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b) The stock is worth $0 today.
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c) The stock paid no dividends during the year.
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d) Both b and c must be true.
Moshe purchased a stock for $30 last year. He found out today that he had a –100 percent return on his investment. Which of the following must be true?
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a) The stock is worth $30 today.
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b) The stock is worth $0 today.
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c) The stock paid no dividends during the year.
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d) Both b and c must be true.
Bonds sell at a discount off the par value when market rates for similar bonds are
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less than the bond’s coupon rate.
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Market rates are irrelevant in determining a bond’s price.
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greater than the bond’s coupon rate.
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equal to the bond’s coupon rate.
Which of the following statements is most true about zero coupon bonds?
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They typically sell at a premium over par when they are first issued.
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They are always convertible to common stock.
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They typically sell for a higher price than similar coupon bonds.
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They typically sell at a deep discount below par when they are first issued.
The expected return on Kiwi Computers stock is 16.6 percent. If the risk-free rate is 4 percent and the expected return on the market is 10 percent, then what is Kiwi’s beta?
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1.26
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3.15
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2.10
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2.80
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Payback: Binder Corp. has invested in new machinery at a cost of $1,450,000. This investment is expected to produce cash flows of $640,000, $715,250, $823,330, and $907,125 over the next four years. What is the payback period for this project?
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3.00 years
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1.88 years
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2.12 years
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4.00 years
Payback: Elmer Sporting Goods is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $812,500, and 1,200,000 over the next three years. What is the payback period for this project?
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More than 3 years
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1.57 years
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2.43 years
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3 years
Payback: Elmer Sporting Goods is getting ready to produce a new line of gold clubs by investing $1.85 million. The investment will result in additional cash flows of $525,000, $812,500, and 1,200,000 over the next three years. What is the payback period for this project?
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More than 3 years
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1.57 years
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2.43 years
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3 years
Payback: Carmen Electronics bought new machinery for $5 million. This is expected to result in additional cash flows of $1.2 million over the next seven years. What is the payback period for this project? If their acceptance period is five years, will this project be accepted?
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3.83 years; no
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4.17 years; no
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3.83 years; yes
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4.17 years; yes
Discounted payback: Carmen Electronics bought new machinery for $5 million. This is expected to result in additional cash flows of $1.2 million over the next seven years. The firm’s cost of capital is 12 percent. What is the discounted payback period for this project? If the firm’s acceptance period is five years, will this project be accepted?
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6.1 years; no
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5.4 years; no
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4.6 years; yes
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4.2 years; yes
Stillwater Drinks is trying to determine when to harvest the water from the fountain of youth that it currently owns. If it harvests the water in year 1, the NPV of the project would increase over an immediate harvest by 18 percent. A year 2 harvest would create an NPV increase of 12 percent over that of year 1 and year 3 would create an NPV increase of 8 percent over that of year 2. If the cost of capital is 17 percent for Stillwater, then which harvest year would maximize the NPV for the firm? Assume that all NPVs are calculated from the perspective of today.
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Harvest in year 1.
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Harvest immediately.
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Harvest in year 2.
