Download BA4347_SAMPLE_FINAL

FINAL EXAM: PRACTICE
1.
The secondary capital markets in the US are
(a) small in dollar amount.
(b) efficient.
(c) dominated by IPO’s.
(d) facilitated by investment bankers.
(e) all of the above.
2.
(b)
The major difference between the Accounting Model of valuation and the
Economic Model of valuation is
(a) usage.
(b) R&D expenses.
(c) EPS and P/E ratio versus cash flows.
(d) the time value of money.
(e) the CEO.
3.
(c)
Which of the following is not an example of how most modern corporate
executives are financially rewarded?
(a) stock options
(b) fixed wages
(c) incentive contracts
(d) revenues
(e) earnings per share growth
(d)
4.
Corporate managers can add value to the firm in both of the following ways?
(a) NPV > 0 and EVA < 0
(b) NPV < 0 and EVA < 0
(c) NPV > 0 and EVA > 0
(d) NPV < 0 and EVA > 0
(e) NPV > EVA.
5.
(c)
Which of the following is not recommended for use in modern capital budgeting?
(a) IRR
(b) Payback
(c) NPV
(d) PI
(e) discounted cash flows. (b)
6.
The difference between risk and uncertainty is that
(a) risk is not known ahead of time.
(b) uncertainty is forecasted by the CFO.
(c) risk is accounted for by the CAPM.
(d) uncertainty is not forecasted ahead of time.
(e) risk and uncertainty are the same. (d)
7.
The major way that strategic value is allowed for in capital budgeting is through the
use of
(a) decision trees.
(b) preferred stock.
(c) convertibles.
(d) options.
(e) bonds.
8.
(d)
A primary problem with applying EVA in a real firm is
(a) allocating fixed costs.
(b) accounting for synergy.
(c) multiperiod application.
(d) (a) and (b).
(e) all of the above.
9.
(e)
How is systematic risk allowed for the in the Capital Asset Pricing Model?
(a) the risk-free rate
(b) the market risk premium
(c) the beta
(d) the return on the market
(e) none of the above.
(c)
10. A capital market dominated by large firms with a bottoms-up approach to allocating
firm capital is called a(an)
(a) external capital market.
(b) large country capital market.
(c) US capital market.
(d) internal capital market.
(e) European capital market.
(d)
11. Which of the following is not a variable in the capital structure puzzle?
(a) corporate taxes
(b) bankruptcy costs
(c) agency costs
(d) signaling effects
(e) all of the above are variables
in the capital structure puzzle. (e)
12. Why does the “pecking order” for new capital acquisition exist?
(a) market efficiency
(b) CEO and CFO conflicts
(c) asymmetrical information
(d) symmetrical information
(e) inefficient capital markets. (c)
13. In the modern corporation the D/E ratio and the dividend yield are approved by the
(a) the CEO.
(b) the CFO.
(c) the labor union boss.
(d) the board-of-directors.
(e) the stockholders.
(d)
14. Risk management(RM) typically depends on
(a) speculating.
(b) hedging.
(c) product costs.
(d) labor contracts.
(e) sales rebates.
15.
(b)
A major difference between a futures and a forward contract is that a futures contract
is
(a) determined by an investment banker.
(b) upward sloping.
(c) downward sloping.
(d) never traded.
(e) marked-to-the-market each day. (e)
16.
The NPV of doing Risk Management(RM)is thought to be negative. Thus, if top
management engages in RM, then the value of the firm in the marketplace must
(a) go down.
(b) go up.
(c) stay the same.
(d) cannot tell.
(e) all of the above.
(a)
17.
Which of the following is not the type of thing which a corporation typically
involves in RM?
(a) interest rates
(b) currencies
(c) product prices
(d) bond yields
(e) stock dividends.
18.
(e)
If RM has a negative impact on the stock price, then what best explains why
investors let top management engage in it?
(a) signaling effects
(b) taxes
(c) volatility decreases
(d) agency costs
(e) D/E ratio.
(d)
19.
If RM is allowed to be performed by top managers, then the possible benefits to the
firm owners are
(a) reduced earnings volatility.
(b) increased debt capacity.
(c) safer dividends.
(d) first best managers.
(e) all of the above.
(e)
20.
The corporate organizational form in the US during the 1980’s – 1990’s can be
described as an age of
(a) conglomeration.
(b) deconglomeration.
(c) diversification.
(d) asymmetric information.
(e) agency costs.
(b)
21. Customers typically like what kind of business organization?
(a) big firms
(b) small firms
(c) optimal sized firms
(d) conglomerations
(e) LBO’s.
(a)
22. What word best describes what the size of the industry- firm will be in the new
millennium?
(a) small
(b) large
(c) optimal
(d) asymmetric
(e) conglomerate.
(c)
23. Which of the following is not considered a component of E-Finance?
(a) E-Banks
(b) E-Loans
(c) E-Firms
(d) E-Customers
(e) all of the above are components. (d)
24. The typical discount as a percentage from the trading price for an IPO is
(a) 5%-7%.
(b) 8%-10%.
(c) 12%-14%.
(d) 3%-5%.
(e) small.
(b)
25. What is a LYON?
(a) Liquid Yield Organization Note
(b) Liquid Yield Option Number
(c) Liquid Yield Option Note
(d) Liquid Yield Option Number
(e) Liquid Yield Organization Number. (c)