INSTRUCTOR: Ing. Daniela Matovcíková, PhD. 90 MINUTES Make sure you submit your sheet with formulas and interest tables; otherwise the grade will not be given. You can earn 80 points. Name and...

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INSTRUCTOR: Ing. Daniela Matovcíková, PhD.


90 MINUTES


Make sure you submit your sheet with formulas and interest tables; otherwise the grade will not be given. You can earn 80 points.


Name and surname: GRADE:







Each multiple-choice question is for 2 points.


  1. Dividends are best defined as:
    A.cash payments to shareholders.
    B.cash payments to either bondholders or shareholders.
    C.cash or stock payments to shareholders.
    D.cash or stock payments to either bondholders or shareholders.
    E.distributions of stock to current shareholders.

  2. The cost of preferred stock:
    A.increases when a firm's tax rate decreases.
    B.is constant over time.
    C.is unaffected by changes in the market price.
    D.is equal to the stock's dividend yield.
    E.increases as the price of the stock increases.

  3. If a project with conventional cash flows has a profitability index of 1.0, the project will:
    A.never pay back.
    B.have a negative net present value.
    C.have a negative internal rate of return.
    D.produce more cash inflows than outflows in today's dollars.
    E.have an internal rate of return that equals the required return.



  1. An agent who buys and sells securities from inventory is called a:
    A.floor trader.
    B.dealer.
    C.commission broker.
    D.broker.
    E.floor broker.

  2. Which one of the following represents the rate of return a firm must earn on its assets if it is to maintain the current value of its securities?
    A.Cost of equity
    B.Internal rate of return
    C.Aftertax cost of debt
    D.Weighted average cost of capital
    E.Debt-equity ratio

  3. Baxter's, Inc. generally holds $125,000 in cash in case an unexpected investment opportunity arises. Which one of the following refers to holding cash for this type of purpose?
    A.Precautionary motive
    B.Opportunistic motive
    C.Speculative motive
    D.Reserve motive
    E.Transaction motive

  4. Discounted cash flow valuation is the process of discounting an investment's:
    A.assets.
    B.future profits.
    C.liabilities.
    D.costs.
    E.future cash flows.



  1. Which one of the following best describes an agreement you make today to exchange U.S. dollars for British pounds three months from now?
    A.Forward trade
    B.Spot trade
    C.Arbitrage transaction
    D.Cross-rate exchange
    E.Eurocurrency transaction

  2. Which one of the following states that the difference in interest rates between two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate?
    A.Arbitrage equilibrium
    B.Relative purchasing power parity
    C.Absolute purchasing power parity
    D.Interest rate parity
    E.Cross rate parity

  3. Which one of the following terms refers to the basic factors that are reviewed when evaluating the creditworthiness of a potential customer?
    A.Terms of sale
    B.Cash concentration
    C.Five Cs of credit
    D.Collection policy
    E.Credit score



Each exercise is for 10 points.

  1. Auto Transmissions is expected to pay annual dividends of $1.90 and $2.10 over the next two years, respectively. After that, the company expects to pay a constant dividend of $2.30 a share. What is the value of this stock at a required return of 15 percent?




  1. Claus Enterprises has 174,000 shares of common stock outstanding at a current price of $46 a share. The firm also has two bond issues outstanding. The first bond issue has a total face value of $250,000, pays 7.7 percent interest annually, and currently sells for 102.5 percent of face value. The second bond issue consists of 5,000 bonds that are selling for $993 each. These bonds pay 6.5 percent interest annually and mature in 8 years. The tax rate is 34 percent. What is the capital structure weight of the firm's common stock?






  1. Chick ‘N Fish is considering two different capital structures. The first option consists of 25,000 shares of stock. The second option consists of 15,000 shares of stock plus $150,000 of debt at an interest rate of 7.5 percent. Ignore taxes. What is the break-even level of earnings before interest and taxes (EBIT) between these two options?






  1. Quattro, Inc. has the following mutually exclusive projects available. The company has historically used a 4-year cutoff for projects. The required return is 11 percent.



Compute the payback for both projects and choose better one.
Compute net present value and recommend better project.


  1. Charlies' writes 135 checks a day for an average amount of $480 each. These checks generally clear the bank in 3 days. In addition, the firm generally receives an average of $159,000 a day in checks that are deposited immediately. Deposited funds are available in 1.5 days. What is the firm's net float?






  1. The 1-year forward rate for the Swiss franc is Sf1.1375 = $1. The spot rate is Sf1.1426 = $1. The interest rate on a risk-free asset in Switzerland is 3.3 percent. If interest rate parity exists, a 1 year risk-free security in the U.S. is yielding _____ percent.


005_e03ra5o-kmhb1wr2.doc
Answered Same DayDec 23, 2021

Answer To: INSTRUCTOR: Ing. Daniela Matovcíková, PhD. 90 MINUTES Make sure you submit your sheet with formulas...

Robert answered on Dec 23 2021
133 Votes
BSC 402 FINAL EXAM, SUMMER 2013
INSTRUCTOR: Ing. Daniela Maťovčíková, PhD.
90 MINUTES
Make sure you submit your sheet with formulas and interest tables; otherwise the grade will not be given. You can earn 80 points.
Name and surname:
GRADE:
    
Each multiple-choice question is for 2 points.
1. Dividends are best defined as: 
A. cash payments to shareholders.
B. cash payments to either bondholders or shareholders.
C. cash or stock payments to shareholders.
D. cash or stock payments to either bondholders or shareholders.
E. distributions of stock to current shareholders.
2. The cost of preferred stock: 
A. increases when a firm's tax rate decreases.
B. is constant over time.
C. is unaffected by changes in the market price.
D. is equal to the stock's dividend yield.
E. increases as the price of the stock increases.
3. If a project with conventional cash flows has a profitability index of 1.0, the project will: 
A. never pay back.
B. have a negative net present value.
C. have a negative internal rate of return.
D. produce more cash inflows than outflows in today's dollars.
E. have an internal rate of return that equals the required return.
4. An agent who buys and sells securities from inventory is called a: 
A. floor trader.
B. dealer.
C. commission broker.
D. broker.
E. floor broker.
5. Which one of the following represents the rate of return a firm must earn on its assets if it is to maintain the current value of its securities? 
A. Cost of equity
B. Internal rate of return
C. Aftertax cost of debt
D. Weighted average cost of capital
E. Debt-equity ratio
6. Baxter's, Inc. generally holds $125,000 in cash in case an unexpected investment opportunity arises. Which one of the following refers to holding cash for this type of purpose? 
A. Precautionary motive
B. Opportunistic motive
C. Speculative motive
D. Reserve motive
E. Transaction motive
7. Discounted cash flow valuation is the process of discounting an investment's: 
A. assets.
B. future...
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