考试样题.docx

1、考试样题Corporate FinanceSample Problems for midterm (conceptual problems)Ch136.(p.11)The financial goal of a corporation is to:a.Maximize profitsb.Maximize salesC.Maximize the value of the firm for the shareholdersd.Maximize managers benefitsCh24.(p.15)The rate of return is also called: I) discount rat

2、e; II) hurdle rate; III) opportunity cost of capitala.I onlyb.I and II onlyC.I,II, and IIId.None of the given ones22.(p.17)Which of the following statements regarding the net present value rule and the rate of return rule is not true?A.Accept a project if NPV cost of investmentb.Accept a project if

3、NPV is positivec.Accept a project if return on investment exceeds the rate of return on an equivalent investment in the financial marketd.Reject a project if NPV is negative26.(p.18)The opportunity cost of capital for a risky project isa.The expected rate of return on a government security having th

4、e same maturity as the projectb.The expected rate of return on a well-diversified portfolio of common stocksC.The expected rate of return on a portfolio of securities of similar risks as the projectd.None of the above36.(p.22)The discount rate is used for calculating the NPV is:A.Determined by the f

5、inancial marketsb.Found by the governmentc.Found by the CEOd.None of the above37.(p.23)The managers of a firm can maximize stockholder wealth by:A.Taking all projects with positive NPVsb.Taking all projects with NPVs greater than the cost of investmentc.Taking all projects with NPVs greater than pre

6、sent value of cash flowd.All of the above39.(p.24)Managers actions are monitored by:a.The board of directorsb.Commercial banks that have loaned funds to the firmc.The Wall Street analystsD.All of the above13.(p.38)Which of the following is generally considered an example of a perpetuity:a.Interest p

7、ayments on a 10-year bondb.Interest payments on a 30-year bondC.Consolsd.None of the above19.(p.38)An annuity is defined asA.Equal cash flows at equal intervals of time for a specified period of timeb.Equal cash flows at equal intervals of time foreverc.Unequal cash flows at equal intervals of time

8、foreverd.None of the above43.(p.43)You are considering investing in a retirement fund that requires you to deposit $5,000 per year, and you want to know how much the fund will be worth when you retire. What financial technique should you use to calculate this value?a.Future value of a single payment

9、B.Future value of an annuityc.Present value of an annuityd.None of the above46.(p.43)Which of the following statements is true?a.Present value of an annuity is always greater than the present value of equivalent annuity due for a given interest rateB.The future value of an annuity due is always grea

10、ter than the future value of an equivalent ordinary annuity at the same interest ratec.Both A and B are trued.Both A and B are false52.(p.46)Which of the following statements regarding simple interest and compound interest are true?a.Problems in finance generally use the simple interest conceptB.Pro

11、blems in finance generally use the compound interest conceptc.It does not really matter whether you use simple interest or compound interest for solving problems in financed.None of the aboveCh31.(p.58)The following entities issue bonds to raise long-term loans except:a.The federal governmentb.State

12、 and local governmentsc.CompaniesD.Individuals2.(p.59)The type of bonds where the identities of bonds owners are recorded and the coupon interest payments are sent automatically are called:a.Bearer bondsb.Government bondsC.Registered bondsd.None of the above13.(p.63)Which of the following statements

13、 about the relationship between interest rates and bond prices is true? I) There is an inverse relationship between bond prices and interest rates II) There is a direct relationship between bond prices and interest rates III) The price of short-term bonds fluctuates more than the price of long-term

14、bonds for a given change in interest rates. (Assuming that coupon rate is the same for both) IV) The price of long-term bonds fluctuates more than the price of short-term bonds for a given change in interest rates. (Assuming that the coupon rate is the same for both)A.I and IV onlyb.I and III onlyc.

15、II and III onlyd.None of the given statements are true21.(p.65)Volatility of a bond is given by: I) Duration/ (1+yield) II) Slope of the curve relating the bond price to the interest rate III) Yield to maturitya.I onlyb.II onlyc.III onlyD.I and II only37.(p.64)The longer a bonds duration greater is

16、its volatility.TRUE38.(p.67)The term structure of interest rate is the relationship between yield to maturity and maturity.TRUE41.(p.71)The expectations theory implies that the only reason for a declining term structure is that investors expect spot interest rates to fall.TRUECh45.(p.98)The dividend

17、 yield reported as Yld. % in The Wall Street Journal quotation is calculated as follows:a.(dividends / hi)b.(dividends / lo)C.(dividends / close)d.None of the above14.(p.100)The value of a common stock today depends on:a.Number of shares outstanding and the number of shareholdersB.The expected futur

18、e dividends and the discount ratec.The Wall Street analystsd.Present value of the future earnings per share21.(p.102)The expected rate of return or the cost of equity capital is estimated as follows:a.Dividend yield - expected rate of growth in dividendsB.Dividend yield + expected rate of growth in

19、dividendsc.Dividend yield / expected rate of growth in dividendsd.(Dividend yield) * (expected rate of growth in dividends)32.(p.108)The growth rate in dividends is a function of two ratios. They are:a.ROA and ROEb.Dividend yield and growth rate in dividendsC.ROE and the Retention Ratiod.Book value

20、per share and EPS35.(p.109)Generally high growth stocks pay:A.Low or no dividendsb.High dividendsc.Erratic dividendsd.Both A and C48.(p.99)The only payoff to the owners of common stocks is in the form cash dividends.FALSE49.(p.102)The constant growth formula for stock valuation does not work for fir

21、ms with negative growth (declining) rates in dividends.FALSECh51.(p.121)Which of the following investment rules does not use the time value of the money concept?a.Net present valueb.Internal rate of returnC.The payback periodd.All of the above use the time value concept3.(p.121)The following are mea

22、sures used by firms when making capital budgeting decisions except:a.Payback periodb.Internal rate of returnC.P/E ratiod.Net present value9.(p.124)You are given a job to make a decision on project X, which is composed of three independent projects A, B, and C which have NPVs of +$70, -$40 and +$100,

23、 respectively. How would you go about making the decision about whether to accept or reject the project?a.Accept the firms joint project as it has a positive NPVb.Reject the joint projectC.Break up the project into its components: accept A and C and reject Bd.None of the above11.(p.124)The net prese

24、nt value of a project depends upon:a.Companys choice of accounting methodb.Managers tastes and preferencesC.Projects cash flows and opportunity cost of capitald.All of the above13.(p.126)The payback period rule:a.Varies the cut-off point with the interest rateb.Determines a cut-off point so that all

25、 projects accepted by the NPV rule will be accepted by the payback period ruleC.Requires an arbitrary choice of a cut-off pointd.Both A and C28.(p.129)The following are some of the shortcomings of the IRR method except:A.IRR is conceptually easy to communicateb.Projects can have multiple IRRsc.IRR m

26、ethod cannot distinguish between a borrowing project and a lending projectd.It is very cumbersome to evaluate mutually exclusive projects using the IRR methodCh61.(p.148)Important points to remember while estimating cash flows of projects are: I) Only cash flow is relevant II) Always estimate cash f

27、lows on an incremental basis III) Be consistent in the treatment of inflationa.I onlyb.I and II onlyc.II and III onlyD.I, II, and III3.(p.149)When a firm has the opportunity to add a project that will utilize excess factory capacity (that is currently not being used), which costs should be used to d

28、etermine if the added project should be undertaken?a.Opportunity costb.Sunk costC.Incremental costsd.None of the above4.(p.149)A reduction in the sales of existing products caused by the introduction of a new product is an example of:A.Incidental effectsb.Opportunity costc.Sunk costd.None of the abo

29、ve7.(p.150)Net Working Capital is the: I) Short-term assets II) Short term liabilities III) Long-term assets IV) Long term liabilitiesa.I onlyB.(I - II)c.(III - I)d.(III - IV)11.(p.150)For example, in case of an electric car project, the following cash flows should be treated as incremental flows wh

30、en deciding whether to go ahead with the project except:a.The consequent reduction in sales of the companys existing gasoline models (i.e.: incidental effects)B.Interest payment on debtc.The value of tools that can be transferred from the companys existing plantsd.The expenditure on new plants and e

31、quipment13.(p.150)The value of a previously purchased machine to be used by a proposed project is an example of:a.Sunk costB.Opportunity costc.Fixed costd.None of the aboveCh71.(p.181)Which of the following portfolios have the least risk?A.A portfolio of Treasury billsb.A portfolio of long-term United Stat