Exam (elaborations) PSU Finance 301 Exam 1 Questions with Correct Answers Exam (elaborations) Finance 301 Final Exam Questions with Correct Answers Exam (elaborations) Final Exam Study Fin 301 Ch. 14-15b Questions with Correct Answers Exam (elaborations) Final Exam Fin 301 Concept Questions...
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capital budgeting - Answer-the process of planning and managing a firm's long-term investments capital structure - Answer-the specific mixture of long-term debt and equity the firm uses to finance its operations -how much should the firm borrow? -what are the least expensive sources of funds...
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Add to cartcapital budgeting - Answer-the process of planning and managing a firm's long-term investments capital structure - Answer-the specific mixture of long-term debt and equity the firm uses to finance its operations -how much should the firm borrow? -what are the least expensive sources of funds...
Firms use capital to: (i) purchase a company (ii) pay for day-to-day expenses (iii) establish or expand a business A) i B) ii C) ii & iii D) all of the above E) iii F) none of the above G) i & iii - Answer-G) i & iii Which of these items are considered part of a firm's capitalization...
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Add to cartFirms use capital to: (i) purchase a company (ii) pay for day-to-day expenses (iii) establish or expand a business A) i B) ii C) ii & iii D) all of the above E) iii F) none of the above G) i & iii - Answer-G) i & iii Which of these items are considered part of a firm's capitalization...
Three Primary Areas of Finance - Answer-1. Corporate finance : how they manage $ 2. Institutions & Markets : dominate economic market 3. Investments : decisions of buying stock/market Basic Corporate Financial Decisions - Answer-The Investment Decision: allocating scarce resources across compet...
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Add to cartThree Primary Areas of Finance - Answer-1. Corporate finance : how they manage $ 2. Institutions & Markets : dominate economic market 3. Investments : decisions of buying stock/market Basic Corporate Financial Decisions - Answer-The Investment Decision: allocating scarce resources across compet...
Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant? A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage. A bank loan's nominal interest rate will always be equal to or...
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Add to cartWhich of the following statements is CORRECT, assuming positive interest rates and holding other things constant? A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage. A bank loan's nominal interest rate will always be equal to or...
If an asset will generate payments of $30 forever, what is today's value of this investment, assuming your required rate of return is 10%? - Answer-$300 ToF: The present value of an annuity due is less than the present value of an ordinary annuity. - Answer-False ToF The IRR method of analyzi...
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Add to cartIf an asset will generate payments of $30 forever, what is today's value of this investment, assuming your required rate of return is 10%? - Answer-$300 ToF: The present value of an annuity due is less than the present value of an ordinary annuity. - Answer-False ToF The IRR method of analyzi...
low risk investments have... - Answer-lower expected returns high risk investments have... - Answer-higher expected returns the least risky investment - Answer-treasury bills the most risky investment - Answer-small company common stocks price/return volatility is a way to measure? - Ans...
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Add to cartlow risk investments have... - Answer-lower expected returns high risk investments have... - Answer-higher expected returns the least risky investment - Answer-treasury bills the most risky investment - Answer-small company common stocks price/return volatility is a way to measure? - Ans...
Discount - Answer-Multiply a number by less than one. Discount rate - Answer-A function of time and risk: discount rate=f(time, risk) Discount factor - Answer-A function of both time and the discount rate: [discount rate=f(time, discount)] Present value - Answer-of an investment is the sum ...
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Add to cartDiscount - Answer-Multiply a number by less than one. Discount rate - Answer-A function of time and risk: discount rate=f(time, risk) Discount factor - Answer-A function of both time and the discount rate: [discount rate=f(time, discount)] Present value - Answer-of an investment is the sum ...
In CAPM, the expected return on a stock is directly related to its _____? A. Alpha B. Beta C. Interest Rate D. WACC E. All of the above - Answer-B Which of the following is true about bonds? A. The longer the maturity of the bond, the higher the interest rate risk B. There is a positi...
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Add to cartIn CAPM, the expected return on a stock is directly related to its _____? A. Alpha B. Beta C. Interest Rate D. WACC E. All of the above - Answer-B Which of the following is true about bonds? A. The longer the maturity of the bond, the higher the interest rate risk B. There is a positi...
Capital budgeting - Answer-planning and managing a firm's long term investments Ex: deciding to open at new location, or what computer system to use Capital Structure - Answer-mixture of debt and equity maintained by a firm Ex: How much should firm borrow and what are least expensive sources o...
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Add to cartCapital budgeting - Answer-planning and managing a firm's long term investments Ex: deciding to open at new location, or what computer system to use Capital Structure - Answer-mixture of debt and equity maintained by a firm Ex: How much should firm borrow and what are least expensive sources o...
A firm's capital structure is comprised of only the firm's long-term sources of financing while the firm's financial structure includes both short- and long-term debt and equity financing. - Answer-True A corporation's optimal capital structure is usually the one that will lead to the maximiz...
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Add to cartA firm's capital structure is comprised of only the firm's long-term sources of financing while the firm's financial structure includes both short- and long-term debt and equity financing. - Answer-True A corporation's optimal capital structure is usually the one that will lead to the maximiz...
The objective behind computing a firm's weighted average cost of capital (WACC) is to determine the cost of - Answer-investor supplied financing to the firm. Investor supplied financing comes from 4 component sources: - Answer-1. interest bearing debt 2. preferred stock 3. common stock 4. ret...
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Add to cartThe objective behind computing a firm's weighted average cost of capital (WACC) is to determine the cost of - Answer-investor supplied financing to the firm. Investor supplied financing comes from 4 component sources: - Answer-1. interest bearing debt 2. preferred stock 3. common stock 4. ret...
Net Present Value Definition - Answer-Incremental or marginal net value created by undertaking a project Net Present Value Decision Rule - Answer-1) If the NPV is positive, accept the project 2) Most reliable method to compare and evaluate projects A positive NPV is expected to..? - Answer-* ...
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Add to cartNet Present Value Definition - Answer-Incremental or marginal net value created by undertaking a project Net Present Value Decision Rule - Answer-1) If the NPV is positive, accept the project 2) Most reliable method to compare and evaluate projects A positive NPV is expected to..? - Answer-* ...
Which of the following asset classes would you expect to have the highest expected return and standard deviation? Treasury bills Government bonds Corporate bonds Large company stocks Small company stocks - Answer-Small company stocks Calculate the compound annual return on an invest...
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Add to cartWhich of the following asset classes would you expect to have the highest expected return and standard deviation? Treasury bills Government bonds Corporate bonds Large company stocks Small company stocks - Answer-Small company stocks Calculate the compound annual return on an invest...
Maturity of the Bond - Answer-The number of years until the issuer returns the face value to the buyer Face value - Answer-The principal of the bond, which has to be repaid at maturity NPV Rule - Answer-The NPV rule says that you should accept a project if its NPV greater than 0 because it add...
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Add to cartMaturity of the Bond - Answer-The number of years until the issuer returns the face value to the buyer Face value - Answer-The principal of the bond, which has to be repaid at maturity NPV Rule - Answer-The NPV rule says that you should accept a project if its NPV greater than 0 because it add...
Opportunity Costs - Answer-the value of the next highest-valued alternative use of a resource Opportunity Costs consists of: - Answer-- foregone wages - time - production decisions Foregone wages - Answer-- Why did you come to class today? - Should you go to grad school? Time - Answer...
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Add to cartOpportunity Costs - Answer-the value of the next highest-valued alternative use of a resource Opportunity Costs consists of: - Answer-- foregone wages - time - production decisions Foregone wages - Answer-- Why did you come to class today? - Should you go to grad school? Time - Answer...
Capital Budgeting - Answer-the process of planning and managing a firm's long-term investments Capital Structure - Answer-the mixture of debt and equity maintained by a firm Working Capital - Answer-a firm's short-term assets and liabilities. Sole Proprietorship - Answer-a business owned ...
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Add to cartCapital Budgeting - Answer-the process of planning and managing a firm's long-term investments Capital Structure - Answer-the mixture of debt and equity maintained by a firm Working Capital - Answer-a firm's short-term assets and liabilities. Sole Proprietorship - Answer-a business owned ...
How are future values affected by changes in interest rates? - Answer-The lower the interest rate, the larger the future value will be We call the process of earning interest on both the original deposit and on the earlier interest payments: - Answer-compounding the process of figuring out how...
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Add to cartHow are future values affected by changes in interest rates? - Answer-The lower the interest rate, the larger the future value will be We call the process of earning interest on both the original deposit and on the earlier interest payments: - Answer-compounding the process of figuring out how...
Using the balance sheet model of the firm, corporate finance may be thought of as the analysis of three primary subject areas. What are these areas: - Answer-capital budgeting, capital structure, net working capital capital structure - Answer-the mix of long-term debt and equity of a firm Whic...
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Add to cartUsing the balance sheet model of the firm, corporate finance may be thought of as the analysis of three primary subject areas. What are these areas: - Answer-capital budgeting, capital structure, net working capital capital structure - Answer-the mix of long-term debt and equity of a firm Whic...
One disadvantage of the corporate form of business ownership is the: A. double taxation of distributed profits B. firm's greater ability to raise capital than other forms of ownership. C. limited liability of its shareholders for the firm's debts. D. firm's potential for an unlimited life. ...
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Add to cartOne disadvantage of the corporate form of business ownership is the: A. double taxation of distributed profits B. firm's greater ability to raise capital than other forms of ownership. C. limited liability of its shareholders for the firm's debts. D. firm's potential for an unlimited life. ...
Which of the following concerning the relationship between risk and return is correct? A. A risk taker investor would prefer a stock with an expected 10% return and a standard deviation of 10% to a stock with an expected return of 10% with a standard deviation of 20% B. Investors generally demand ...
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Add to cartWhich of the following concerning the relationship between risk and return is correct? A. A risk taker investor would prefer a stock with an expected 10% return and a standard deviation of 10% to a stock with an expected return of 10% with a standard deviation of 20% B. Investors generally demand ...
According to the efficient market hypothesis, using technical analysis to forecast future stock prices is - Answer-Useless Believers of behavioral finance principles do believe that - Answer-Markets are not always efficient According to the Principles of Finance, risk aversion means: - Answer-...
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Add to cartAccording to the efficient market hypothesis, using technical analysis to forecast future stock prices is - Answer-Useless Believers of behavioral finance principles do believe that - Answer-Markets are not always efficient According to the Principles of Finance, risk aversion means: - Answer-...
Beta is used in the capital asset model primarily as a measure of - Answer-Risk According to the principles of finance, what should be management's goal when making corporate decisions? - Answer-Maximizing Shareholder Value The basic principles of finance dictate that in the short-run, stock ...
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Add to cartBeta is used in the capital asset model primarily as a measure of - Answer-Risk According to the principles of finance, what should be management's goal when making corporate decisions? - Answer-Maximizing Shareholder Value The basic principles of finance dictate that in the short-run, stock ...
The amount that is originally borrowed or the amount that is repaid when the bond mature is due is known as ___________. A. Indenture. B. Par value. C. Principal amount. D. Maturity value. E. B, C, and D are correct. - Answer-E Which of the following is NOT the amount that is originally...
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Add to cartThe amount that is originally borrowed or the amount that is repaid when the bond mature is due is known as ___________. A. Indenture. B. Par value. C. Principal amount. D. Maturity value. E. B, C, and D are correct. - Answer-E Which of the following is NOT the amount that is originally...
Which of the following is an example of asset allocation? A. A. Choosing how much to invest in energy companies vs. utility companies B. Choosing how much to invest in stocks vs. bonds C. Choosing how much to invest in Apple vs. Microsoft D. None of the above - Answer-B True or False: Beta...
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Add to cartWhich of the following is an example of asset allocation? A. A. Choosing how much to invest in energy companies vs. utility companies B. Choosing how much to invest in stocks vs. bonds C. Choosing how much to invest in Apple vs. Microsoft D. None of the above - Answer-B True or False: Beta...
Which of the following concerning the relationship between risk and return is correct? - Answer-A risk averse investor would prefer a stock with an expected 10% return and a standard deviation of 10% to a stock with an expected return of 10% with a standard deviation of 20% A company that decides...
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Add to cartWhich of the following concerning the relationship between risk and return is correct? - Answer-A risk averse investor would prefer a stock with an expected 10% return and a standard deviation of 10% to a stock with an expected return of 10% with a standard deviation of 20% A company that decides...
The process of finding the future value of dollar is called discounting. - Answer-False 1. The process of finding the future value of a dollar is called compounding. True False - Answer-True 1. For a series of equal flows over equal periods of time, those flows are called annuities. True...
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Add to cartThe process of finding the future value of dollar is called discounting. - Answer-False 1. The process of finding the future value of a dollar is called compounding. True False - Answer-True 1. For a series of equal flows over equal periods of time, those flows are called annuities. True...
small cap stocks are riskier than corporate bonds - Answer-true investors believe that transaction costs, taxes, and inflation are the enemy bc they reduce the return on your investments - Answer-true the basic principles of finance dictate that in the short run, stock prices are driven by - A...
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Add to cartsmall cap stocks are riskier than corporate bonds - Answer-true investors believe that transaction costs, taxes, and inflation are the enemy bc they reduce the return on your investments - Answer-true the basic principles of finance dictate that in the short run, stock prices are driven by - A...
It is generally accepted that the primary goal or objective of the managers of a firm should be maximize profit - Answer-false; maximize wealth of owners the common equity portion of a firm's balance sheet may include each of the following: common stock, retained earnings, and long term debt - A...
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Add to cartIt is generally accepted that the primary goal or objective of the managers of a firm should be maximize profit - Answer-false; maximize wealth of owners the common equity portion of a firm's balance sheet may include each of the following: common stock, retained earnings, and long term debt - A...
Shareholder Wealth - Answer-Represented by market price of a firm's common stock. Present Value - Answer-the value today of some future payment or stream of payments evaluated at an appropriate discount rate. Discount Rate - Answer-takes into account the returns that are available from alt...
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Add to cartShareholder Wealth - Answer-Represented by market price of a firm's common stock. Present Value - Answer-the value today of some future payment or stream of payments evaluated at an appropriate discount rate. Discount Rate - Answer-takes into account the returns that are available from alt...
Mary owns a risky stock and anticipates earning 16.5 percent on her investment in that stock. Which one of the following best describes the 16.5 percent rate? - Answer-Expected return Stock A comprises 28 percent of Susan's portfolio. Which one of the following terms applies to the 28 percent? -...
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Add to cartMary owns a risky stock and anticipates earning 16.5 percent on her investment in that stock. Which one of the following best describes the 16.5 percent rate? - Answer-Expected return Stock A comprises 28 percent of Susan's portfolio. Which one of the following terms applies to the 28 percent? -...
Which of the following is a stakeholder of a firm? -Taxpayers -Central bank -The firm's competitor -Employees - Answer-employees The audit committee reports directly to the - Answer-board of directors Which of the following is an example of frivolous agency costs? -Excessive perks. -Inv...
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Add to cartWhich of the following is a stakeholder of a firm? -Taxpayers -Central bank -The firm's competitor -Employees - Answer-employees The audit committee reports directly to the - Answer-board of directors Which of the following is an example of frivolous agency costs? -Excessive perks. -Inv...
b - Answer-1. Securities with maturities of one year or less are classified as A) capital market instruments. B) money market instruments. C) preferred stock. D) none of the above c - Answer-2. Which of the following is not a money market security? A) Treasury bill B) negotiable certificate...
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Add to cartb - Answer-1. Securities with maturities of one year or less are classified as A) capital market instruments. B) money market instruments. C) preferred stock. D) none of the above c - Answer-2. Which of the following is not a money market security? A) Treasury bill B) negotiable certificate...
Maximize the shareholder value of the firm - Answer-What is the primary goal of financial managers? c. In class, my analogy for net working capital was "cash in your wallet"; a firm may need short term funding in case on an emergency, but it isn't making you much of a return - Answer-Which of ...
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Add to cartMaximize the shareholder value of the firm - Answer-What is the primary goal of financial managers? c. In class, my analogy for net working capital was "cash in your wallet"; a firm may need short term funding in case on an emergency, but it isn't making you much of a return - Answer-Which of ...
The true owners of the corporation are the ________ - Answer-common stockholders which of the following statements best represents what finance is about? - Answer-The study of how people and business make investment decisions and how to finance those decisions The revenue recognition principle...
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Add to cartThe true owners of the corporation are the ________ - Answer-common stockholders which of the following statements best represents what finance is about? - Answer-The study of how people and business make investment decisions and how to finance those decisions The revenue recognition principle...
Two main measures for Cost of Debt Capital for entities - Answer-1. Pre-tax - does not include effect in Income Statement (Does not include Tax Shield effect) 2. (Real world) Post-tax - includes effect on Income Statement. (Includes Tax Shield effect) rD, Post-tax - Answer-(1-Trate)*rD, pretax...
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Add to cartTwo main measures for Cost of Debt Capital for entities - Answer-1. Pre-tax - does not include effect in Income Statement (Does not include Tax Shield effect) 2. (Real world) Post-tax - includes effect on Income Statement. (Includes Tax Shield effect) rD, Post-tax - Answer-(1-Trate)*rD, pretax...
Spontaneously generated funds are generally defined as follows: a: Funds that a firm must raise externally through borrowing or by selling new common or preferred stock. b: Funds that arise out of normal business operations from its suppliers, employees, and the government, and they include sp...
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Add to cartSpontaneously generated funds are generally defined as follows: a: Funds that a firm must raise externally through borrowing or by selling new common or preferred stock. b: Funds that arise out of normal business operations from its suppliers, employees, and the government, and they include sp...
Finance - Answer-Involves the management of money Corporate Finance - Answer-the management of money/capital within a corporation. the major monetary decisions facing a corporation concern working capital management , capital budgeting and the capital structure decision capital market - Answer...
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Add to cartFinance - Answer-Involves the management of money Corporate Finance - Answer-the management of money/capital within a corporation. the major monetary decisions facing a corporation concern working capital management , capital budgeting and the capital structure decision capital market - Answer...
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