1.From a finance perspective, what should the primary goal of the Chief Financial Officer (CFO) of the corporation be?

Question 1 options:

A)Maximize the pay and compensation of employees and managers of the firm.

B) Maximize the societal value.

C)Maximize the value of the stockholder's wealth.

D)Maximize market share.

E)Minimize cost.

Question 2(2.5 points)

2.Which of the following should not be included in cash flows (CFFA) for capital budgeting projects?

Question 2 options:

A)Opportunitycost

B)Synergies

C)Taxes

D)Changes to Net Working Capital

E)Sunk Cost

Question 3(2.5 points)

3. Zana has a money market account that earns 2.2% interest. She wants to purchase a matched pair of French Bull Dogs for $3,800. How much must she set aside (invest) monthly so that she can buy them in three years?

Question 3 options:

A) $148.282

B) $169.465

C) $102.207

D) $149.173

E) $1,239.204

Question 4(2.5 points)

4. If the US Treasury Yield Curve is flat, then it is indicating

Question 4 options:

A) adownturn in the economy

B) anupturn in the economy

C)no change to the economy (or the economy is in transition phase)

D) That the US Treasury Yield Curve yield does not signal the direction of the economy.

E)The US Treasury Yield Curve maps out corporate borrowing levels.

Question 5(2.5 points)

5.Bank USA offers a stated annual interest rate of 4.65% compounded quarterly.What is the EAR?

Question 5 options:

A) 4.16%

B) 4.05%

C) 4.13%

D) 25%

E) 4.732%

Question 6(2.5 points)

6.You are to receive $75 per year indefinitely.The market rate of interest for these types of payments is 8%.The price you would pay for this stream is:

Question 6 options:

A)$ 9.375

B)$ 81.00

C)$ 93.75

D)$937.50

E)$10.667

Question 7(2.5 points)

7.A court settlement awarded an accident victim four payments of $50,000 to be paid at the end of each of the next four years.Using a discount rate of 4%, calculate the present value of the annuity.

Question 7 options:

A)$173,255

B)$178,495

C)$181,495

D)$184,095

E)$200,000

Question 8(2.5 points)

8. What is the payback period for the following cash flows: today,-$15,000; end ofyear one, + $11,000; end of year two, + $5,300; end of year three, + $5,000.

Question 8 options:

A)0.755 years

B)2.755 years

C)2.34 years

D)2.9 years

E)1.755 year

Question 9(2.5 points)

9. What is the profitable index (PI) if the WACC is 6% and you invest $107,000 today, the future Cash Flows from Assets (CFFA) are $30,500 a year for 9 years / and, should you accept or reject the project?

Question 9 options:

A) 0.285 / Reject

B)0.516 / Accept

C)1.939/ Accept

D)3.05 / Accept

E) 2.94/ Accept

Question 10(2.5 points)

10. In the NPV calculation if you change all variables at the same time to do robustness checks on your original base estimates, then that is called

Question 10 options:

A) Sensitivity analyses

B) Scenario analyses

C) Value at risk (VAR) analyses

D) Average accounting return analyses

E) Internal rate of return analyses

Question 11(2.5 points)

11.You bought 100 shares of stock at $20 each. At the end of the year, you received a total of $400 in dividends, and your stock was worth $2,500 total.What was your total return?

Question 11 options:

A) 20%

B) 45%

C) 50%

D) 90%

E) None of the above.

Question 12(2.5 points)

12. What is the IRR (Internal Rate of Return) of a project that has an initial cost of $130m, expected to have $35m a year in net revenues for the next four years, and then -$35m in year 5 to recover the land?

Question 12 options:

A) 10.803%

B) 3.032%

C) multiple IRR

D) 4%

E) 10%

Question 13(2.5 points)

13. The payback method of decision analysis is the "most beneficial" to use in which one of the following situations?

Question 13 options:

A)A firm that is considering a long-term research project.

B)A firm that can either build a distribution center or a ski lift on the same piece of land, but not both.

C) Starbucks is considering putting in another shop several miles from an existing one in Kennesaw.

D)A coal mine opening another excavation location in a foreign country.

E)The Federal Government evaluating a new COVID19 vaccine.

Question 14(5 points)

14. What is the NPV (Net Present Value) of a coal project that has an initial cost of $3,600m, and expected to have $20m a year in net revenues for the next twenty-eight years, and then in the twenty-ninth year have to pay an environmental cost of $15m to return the land to a green use? The appropriate required return for this project is 14%?

Question 14 options:

A) $3,185m

B)- $3,185m

C)- $92m

D)-$3,461.122m

E)$3,461.122m

Question 15(2.5 points)

15.The Boeing Co. has a beta of 2.75, the market risk premium is 7% and the risk-free rate is 1.4%.What is the Cost of Equity for Boeing?

Question 15 options:

A)20.65%

B)11.15%

C)16.8%

D) 1.4%

E)8.4%

Question 16(2.5 points)

16.If a firm's preferred stock pays a $4 dividend, and its current price is $72, what is the cost of preferred stock?

Question 16 options:

A)8.57%

B)5.556%

C) 4%

D) 6%

E) 18%

Question 17(2.5 points)

17.When the cost of equity is 14%, the cost of debt is 8%, the marginal tax rate is 30% and the capital structure is 80% equity and 20% debt, what must be the weighted average cost of capital (WACC)?

Question 17 options:

A) 14%

B) 7.7%

C) 9.4%

D) 12.32%

E) 11%

Question 18(2.5 points)

18.What is Amazon's YTM if the coupon rate is 4%, coupons are paid semi-annually, the current bond price is $1090, and there is eighteen years left to maturity.

Question 18 options:

A) 6%

B) 6.084%

C) 3.327%

D) 1.667%

E) 3.331%

Question 19(2.5 points)

19.Overland has just paid a dividend of $2.25.These dividends are expected to grow at a rate of 5% in the foreseeable future.The risk of this company suggests that future cash flows should be discounted at a rate of 11%. What is Overland's stock price?

Question 19 options:

A)$20.45

B)$21.48

C)$37.50

D)$39.38

E)$47.70

Question 20(5 points)

20. For a project with a life of four years, if the amount of Net Working Capital (NWC) that is originally needed is $4,500, and then in year one need $4,650, and then $2,000 in year three until the end of the project, what would the changes to NWC be?

Question 20 options:

A)Year 0: -$4,500; Year 1: - $150; Year 2: $0; Year 3: -$2,000; Year 4: $2,650

B) Year 0: -$4,500; Year 1: $1,850; Year 2: -$350; Year 3: $0; Year 4: $0

C) Year 0: -$4,500; Year 1: - $150; Year 2: $0; Year 3: $2,650; Year 4: $2,000

D) Year 0: $4,500; Year 1: $150; Year 2: $0; Year 3: $2,650; Year 4: $2,000

E) Year 0: -$4,500; Year 1: -$4,650; Year 2: -$4,650; Year 3: -$2,000; Year 4: $2,000

Question 21(2.5 points)

21.Which of the following is false?

Question 21 options:

A) The "stand alone principal" is used to calculate CFFA in capital budgeting.

B) Past marketing research studies should be included in CFFA.

C) In general, the constant dividend model is considered an accurate way to estimate the Cost of Preferred Stock.

D)Depreciation itself is a non-cash expense; consequently, it is only relevant for inclusion in capital budgeting because it affects taxes.

E)In the financial market equilibrium,the required return to an investor for a stock is the same as the cost of equity to the company.

Question 22(2.5 points)

22. Jittery Joe's Coffee Shop issued 7-year bonds at a coupon rate of 4.80 percent and the bonds make semi-annual payments.If the YTM on these bonds is 5.4 percent, what is the current bond price?

Question 22 options:

A)$ 965.41

B)$ 965.78

C)$1,000.00

D)$1,048.42

E)$1,024

Question 23(2.5 points)

23. If the project has higher than average risk relative to the average project of the firm, then

Question 23 options:

A) Use the WACC to discount the cash flows for NPV determination.

B) Use a pure play to determine the correct discount rate for the project.

C) Use a higher discount rate from a subjective approach relative to WACC.

D) Use a lower discount rate from a subjective approach relative to WACC.

E) Both B and C would be correct approaches to use.

Question 24(2.5 points)

24.The shortcoming(s) of the Payback Period decision criteria is (are)

Question 24 options:

A)the use of net income instead of cash flows.

B)it is easy to calculate.

C)there is not a theoretically derived cutoff rate.

D)it uses book value accounting.

E)All of the above are shortcomings.

Question 25(2.5 points)

25.Using the Fischer Equation what is the real rate of interest if the nominal rate is 5.8% and expected inflation is 2.3%?

Question 25 options:

A) 8.233%

B) 4.10%

C) 3.421%

D) 3.5%

E) 8.10%

Question 26(2.5 points)

26. Your bank pays 4% continuous compounding.If you have $10,000 to invest how much will you have in 3 years?

Question 26 options:

A.) $10,000.000

B.) $12,214.028

C.) $11,274.894

D.) $11,274.968

E.) $10,518.254

Question 27(2.5 points)

27.Systemic risk does not include

Question 27 options:

A)The Dollar Exchange Rate

B)Monetary policy

C)GDP growth rate

D)Government Debt Burden

E)All of the above are systemic risk

Question 28(2.5 points)

28. The "total" risk of a stock held in isolation is measured in finance by:

Question 28 options:

A)undiversifiable risk

B)the standard deviation (or variance)

C)expected return of the portfolio

D)beta risk

E)the market risk premium

Question 29(2.5 points)

29.A bond pays a coupon of $160.If the yield to maturity is 15%, then the bond will sell at a ___________.If the yield to maturity is 18%, then the bond will sell at a __________.

Question 29 options:

A)discount; discount

B)premium; premium

C) discount; premium

D)premium; discount

E) par value; premium

Question 30(5 points)

30.

1. If you have three stocks with the following variances and betas, then (A) which stock has the most risk; (B) which stock has the most systematic risk; and (C) which stock should have the highest expected return?

VarianceBeta

Stock A0.00452.9

Stock B0.14562.2

Stock C0.20231.1

Question 30 options:

A) Most risk Stock A; most systematic risk Stock C; highest expected return Stock A

B) Most risk Stock C; most systematic risk Stock C; highest expected return Stock C

C)Most risk Stock B; most systematic risk Stock C; highest expected return Stock C

D) Most risk Stock B; most systematic risk Stock A; highest expected return Stock B

E) Most risk Stock C; most systematic risk Stock A; highest expected return Stock A

Question 31(2.5 points)

31.What is the portfolio weight for Amazon if you invest $4,500 in it, $4,000 in Boeing, and $7,000 in Home Depo?

Question 31 options:

A) 0.290

B) 0.400

C) 0.155

D) 0.258

E) 0.267

Question 32(5 points)

32.A proposed investment has an equipment cost of $1,400.It will have a life of 2 years. The cost will be depreciated straight-line to a zero-salvage value. Sales will be $4,250 per year and variable costs will run $420 per year, and fixed cost $130 per year. The firm will also need to invest $780 in net working capital.The corporate marginal tax rate is 33% while the average tax rate is 30%.What are the cash flows from assets (CFFA) for this project?

Question 32 options:

A)Year 0: -$1,400; Year 1: $2,710; Year 2: $2,710

B)Year 0: -$1,400; Year 1: $3,000; Year 2: $3,780

C)Year 0: -$2,180; Year 1: $2,710; Year 2: $3,490

D)Year 0: -$2,180; Year 1: $2,010; Year 2: $2,790

E)Year 0: -$780; Year 1: $2,010; Year 2: $2,710

Question 33(5 points)

33.Which of the following is false?

Question 33 options:

A)If the capital structure of the firm is going to be changed next year then you would use the future capital structure weights instead of the current ones to calculate WACC for capital budgeting.

B)If the required rate of return for a project is 8% and the IRR of theproject is 7.5%, then we would reject this project under the IRR decision criteria.

C)For two mutually exclusive projects if the required return is the same as the crossover point, then you would be indifferent to which project you should take on.

D)If the current return for Tractor Supply Stock is 9% and the expected return from the CAPM is 11%, then the current stock price is under-valued.

E)The EAR = APR when there is annual compounding.

Question 34(5 points)

34.The book value of Aloha Airlines debt is $42 million but is currently trading for 95% of book value, has a coupon rate of 6% and priced to yield 4.8%.The 2,600,000 shares of stock are currently trading at $11.65 per share. The risk-free rate is 1.7%, the expected return to the market portfolio is 9%, and the beta for the firm is 1.8. There are 600,000 shares of preferred stock priced at $30 per share. Preferred Stock dividends are $2/share. The average tax rate is 30% and the marginal rate is 25%. What is the weighted average cost of capital (WACC)?

Question 34 options:

A) WACC = 9.822%

B) WACC = 8.09%

C) WACC = 9.526%

D) WACC = 8.3%

E) WACC =7.45%