How much for this attached one?
MGT 3470 Corporate Finance Fall 2021 Assignment Due Date: December 4 2021 6:00pm Part A: Multiple Choice Questions 1. The risks arising from which of the following events cannot be eliminated through diversification? A. Rogers Communications reinstates ousted chair after court backs his bid to shakeup board B. FDA requests removal of all ranitidine products (zantac) from the market C. Hundreds of American Airlines regional flight attendants vote to strike D. Bank of Canada announces its target for the overnight rate will be increased by 25 basis points E. Power outages in China have halted operations for some Apple and Tesla suppliers 2. You hold two stocks in your portfolio: A and B. The portfolio beta is 1.50. Stock A comprises 20% of the dollar value of your holdings and has a beta of 1.0. If you sell all of your investment in A and invest the proceeds in the risk-free asset, your new portfolio beta will be: A. 0.850 B. 1.025 C. 1.200 D. 1.300 E. 1.625 3. In which of the following cases would it most likely be appropriate to use the company’s current WACC to evaluate the new project? A. A gas tank manufacturer is contemplating switching to manufacturing leashes for dogs B. A pizza delivery service is planning to expand its delivery area C. A grocery store owner is considering adding a bakery and delicatessen to his store D. A manufacturer of tire irons is considering starting up a chain of retail stores. E. An oil producer is planning to develop a golf course to benefit the community. 4. A firm is considering a project that is virtually risk-free. The company has a beta of 1.3 and a debt-equity ratio of .4. The appropriate discount rate to use in analyzing this project is: A. The firm's latest WACC. B. Zero. C. The Treasury bill rate. D. An adjusted WACC based on a beta of 1.0. E. 15%. 5. Which of the following is NOT accurate regarding cost of equity capital estimates calculated using the SML approach? A. The SML applies only to firms with stable dividend growth rates. B. Unlike the dividend growth model, the SML estimate adjusts for risk. C. To implement this approach, the financial manager must estimate a market risk premium and a beta coefficient. D. The quality of the estimate using the SML approach is sensitive to the quality of the estimates for the input variables in the model. E. Beta in SML model measures the market risk of an asset. 6. The Mores Clothing Depot maintains a debt-equity ratio of .50 and follows a residual dividend policy. The firm needs $2,700 for new investments next year. The after-tax earnings this year are $1,700. What is the amount that the Clothing Depot will pay out in dividends for this year? A. $0 B. $100 C. $350 D. $650 E. $1,000 7. All else the same, an investor is likely to prefer firms with low dividend payouts: A. If the firm doesn't have any positive NPV projects in which it could invest. B. If marginal corporate tax rates exceed marginal personal tax rates. C. If flotation costs are significant. D. If the investor has a need for current income. E. If the investor is tax-exempt. 8. Which one of the following statements regarding stock dividend is true? A. Stock dividend causes the value of a stock to decline but does not cause total market value of the equity to decline. B. Stock dividend is actually reversed stock repurchase. C. Stock dividend is the same as stock split and it will help increase the liquidity of firms' shares. D. Stock dividend is considered part of firms' payout policy. E. None of the above. 9. Assume that the inflation rate in Canada is 3 percent over the next four years while the rate in the U.S. is 4 percent for the same time period. Given this, which of the following statements are correct? I. U.S. dollar will appreciate relative to the Canadian dollar. II. U.S. dollar will depreciate relative to the Canadian dollar. III. exchange rate between the U.S. dollar and the Canadian dollar should increase by 1 percent over the four years. IV. exchange rate between the U.S. dollar and the Canadian dollar should decrease by 1 percent over the four years. A. I only B. II only C. III only D. I and III only E. II and IV only 10. A Eurobond is: A. A bond issued solely in Europe and denominated in Euros. B. An international bond issued in multiple countries but denominated solely in Euros. C. An international bond issued in multiple countries but denominated in a single currency. D. A bond sold solely within the U.S. and denominated in both dollars and Euros. E. A bond sold solely within one country but denominated in another country's currency. 11. Based on the theory of interest rate parity, the percentage forward premium or discount is approximately equal to the difference in _______ interest rates. A. Nominal risk-free B. Real risk-free C. Nominal risky D. Real risky E. Inflation-adjusted 12. In the spot market, you can buy 57 EUR for $100. In the 6-month forward market, $100 will buy 58 EUR. Thus, the dollar is selling at _____ relative to the Euro and the Euro is selling at _____ relative to the dollar. A. a discount; a discount B. a discount; a premium C. par; a premium D. a premium; a discount E. a premium; a premium 13. The Canadian risk-free rate is 5%. The British risk-free rate is 9%. Expected inflation in Canada is 3%. What is the expected inflation rate in Britain? A. 3% B. 4% C. 7% D. 10% E. 11% 14. Triangle arbitrage: I. is a profitable situation involving three separate currency exchange transactions. II. helps keep the currency market in equilibrium. III. opportunities can exist in either the spot or the forward market. IV. only involves currencies other than the Canadian dollar. A. I and IV only B. II and III only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV 15. You sell one futures contract for 112,000 pounds of sugar with a settlement price of 20.87 cents per pound. If the price is 19.63 cents per pound at the contract expiration, what is your payoff? A. -$138,880 B. -$122,420 C. $115,378 D. $122,420 E. $138,880 16. Which of the following is the best definition of call option? A. Risk that futures prices will not move directly with cash price hedged. B. An option that gives the owner the right, but not the obligation, to buy an asset. C. A contract that pays off when a credit event occurs, default by a particular company termed the reference entity, giving the buyer the right to sell corporate bonds issued by the reference entity at their face value. D. Hedging an asset with contracts written on a closely related, but not identical, asset. E. A financial asset that represents a claim to another financial asset. 17. Which of the following is the best definition of economic exposure? A. Long-term financial risk arising from permanent changes in prices or other economic fundamentals. B. A legally binding agreement between two parties calling for the sale of an asset or product in the future at a price agreed upon today. C. A forward contract with the feature that gains and losses are realized each day rather than only on the settlement date. D. Reducing a firm's exposure to price or rate fluctuations. E. An agreement that gives the owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time. 18. Which of the following securities are publicly traded? I. Commodity futures contracts II. Stock option contracts III. Interest rate forward contracts IV. Currency option contracts A. II and IV only B. I, II, and III only C. I, II, and IV only D. III, and IV only E. I, II, III, and IV 19. You are an international exporter with most of your sales coming from Germany. You are concerned about fluctuations in the Euro versus dollar exchange rate. Since your sales are fairly predictable, your best bet for minimizing exchange rate risk is: A. Entering into a currency swap. B. Entering into an interest rate swap. C. Entering into a commodity swap. D. Cross-hedging with English pounds. E. Cross-hedging with LIBOR. 20. Which of the following statements concerning hedging are correct? I. Hedging done at a divisional level can increase the overall financial risk of a firm. II. It is easier to hedge long-term financial risk than to hedge short-term financial risk. III. Hedging gives a firm time to react to fundamental changes in market conditions. IV. Hedging provides protection, at least to some degree, from transitory price fluctuations. A. I and III only B. III and IV only C. I, II, and III only D. II, III, and IV only E. I, III, and IV only Part B: Short Answer and Calculation Questions 1. True/False: Determine and briefly explain (in no more than four sentences) whether the following statements are true or false. a) “Adding some international securities into a portfolio of Canadian stocks helps reduce unsystematic risk in a portfolio.” b) “If a firm uses its WACC as the discount rate for all of the projects it undertakes, then the firm will tend to become riskier over time.” c) “According to the relative purchasing power parity theory, high inflation in country A and low inflation in country B will cause the value of country A's currency to appreciate relative to that of country B.” d) “For forward contracts, the payoff profile for the seller of a forward contract is a upward sloping linear function.” 2. Risk, Return, and Security Market Line. Use the following information to answer questions a)-c). Stock Beta Expected Return A 0.72 8.62% B 1.46 15.79% C 1.38 14.79% D 1.01 12.02% E 0.95 11.40% a) Which one of the above stocks is correctly priced if the risk-free rate of return is 3.2 percent and the market risk premium is 8.4 percent? (Show your calculations) b) Which ones(one) are(is) underpriced ? (Show your calculations) c) Which ones(one) are(is) overderpriced ? (Show your calculations) d) You would like to combine a risky stock with a beta of 1.68 with U.S. Treasury bills