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FIN 534 Final Exam Help (30/30 Q&A)

 

Latest Exam 2015

 

Question 1

 

 

Cazden Motors’ stock is trading at $30 a share. Call options on the company’s stock are also available, some with a strike price of $25 and some with a strike price of $35. Both options expire in three months. Which of the following best describes the value of these options?

Answer

 

  • Question 2

 

 

BLW Corporation is considering the terms to be set on the options it plans to issue to its executives. Which of the following actions would decrease the value of the options, other things held constant?

Answer

 

  • Question 3

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 4

 

 

An investor who writes standard call options against stock held in his or her portfolio is said to be selling what type of options?

Answer

 

  • Question 5

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 6

 

 

Which of the following statements is most correct, holding other things constant, for XYZ Corporation’s traded call options?

Answer

 

  • Question 7

 

 

To help them estimate the company’s cost of capital, Smithco has hired you as a consultant. You have been provided with the following data: D1 = $1.45; P0 = $22.50; and g = 6.50% (constant). Based on the DCF approach, what is the cost of common from reinvested earnings?

Answer

 

  • Question 8

 

 

Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting?

Answer

 

  • Question 9

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 10

 

 

Adams Inc. has the following data: rRF = 5.00%; RPM = 6.00%; and b = 1.05. What is the firm’s cost of common from reinvested earnings based on the CAPM?

Answer

 

  • Question 11

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 12

 

 

Perpetual preferred stock from Franklin Inc. sells for $97.50 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company’s cost of preferred stock for use in calculating the WACC?

Answer

 

  • Question 13

 

 

Which of the following statements is NOT a disadvantage of the regular payback method?

Answer

 

  • Question 14

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 15

 

 

Projects C and D both have normal cash flows and are mutually exclusive. Project C has a higher NPV if the WACC is less than 12%, whereas Project D has a higher NPV if the WACC exceeds 12%. Which of the following statements is CORRECT?

Answer

 

  • Question 16

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 17

 

 

Suppose a firm relies exclusively on the payback method when making capital budgeting decisions, and it sets a 4-year payback regardless of economic conditions. Other things held constant, which of the following statements is most likely to be true?

Answer

 

  • Question 18

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 19

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 20

 

 

Collins Inc. is investigating whether to develop a new product. In evaluating whether to go ahead with the project, which of the following items should NOT be explicitly considered when cash flows are estimated?

Answer

 

  • Question 21

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 22

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 23

 

 

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

Answer

 

  • Question 24

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 25

 

 

The capital intensity ratio is generally defined as follows:

Answer

 

  • Question 26

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 27

 

 

Which of the following statements is CORRECT?

Answer

 

  • Question 28

 

 

Which of the following assumptions is embodied in the AFN equation?

Answer

 

  • Question 29

 

 

The term “additional funds needed (AFN)” is generally defined as follows:

Answer

 

  • Question 30

 

 

Which of the following statements is CORRECT?

Answer

 

 

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