Quiz 01 (Chapter 1,2,7,8,15)

Question 1
Marks: 1
Contingent claim valuation is:
Choose one answer.

a. To generate cash flows and the risk in the cash flows. In its most common form,
intrinsic value is computed with a discounted cash flow valuation, with the value of an
asset being the present value of expected future cashflows on that asset. DCF


b. None of the others


c. To use option pricing models to measure the value of assets that share option
characteristics. Contingent claim

d. To estimates the value of an asset by looking at the pricing of 'comparable' assets relative
to a common variable like earnings, cashflows, book value or sales. Relative valuation
Question 2
Marks: 1
In 2012, Vietnamese government had a local currency sovereign rating of B1. The typical default
spread (over a default free rate) for B1 rated country bonds in 2012 was 3.5%. If Vietnamese
government issue bonds in Vietnam Dong with a yield to maturity is 10% on 2012, what is risk
free rate in Vietnam dong? : Risk free rate = Government Default spread
Choose one answer.

a. 5%


b. 13.5%

c. 10%


d. 6.5%

Question 3
Marks: 1
What would you expect about the beta of a company when it wants to borrow money from the
banks to buy its outstanding shares from the market?
Choose one answer.

a. Beta will go down


b. Beta will go up


c. Beta will not change


d. Beta will not be affected
Question 4
Marks: 1
If a firm has beta = 1.5, what do you expect about the return of the firm if the market go up 5% ?
Choose one answer.

a. 7.5%


b. 2.5%


c. -7.5%

d. 5%

Question 5
Marks: 1
Bamboo Solution has a beta of 2 in 2010. Company has 15 million USD in debt and 30 USD
million in equity. If the tax rate is 30%, what is the unlevered beta of the company?
Choose one answer. Beta / 1+((1-t)*(D/E))

a. 1.48

b. 2


c. 0.93

d. 2.5

Question 6
Marks: 1
What is the true statement of Philosophical Basis of DCF Valuation:
Choose one answer.

a. Free Cash flow is the basic objects for the company


b. None of the others


c. Cash flow is the most important to shareholders


d. Every asset has an intrinsic value that can be estimated, based upon its characteristics in
terms of cash flows, growth and risk.
Question 7
Marks: 1
What is the discounted rate used to valuate the value of FCFE in the DCF models ?
Choose one answer.

a. WACC


b. Cost of equity


c. None of the
others

d. Cost of capital

Question 8
Marks: 1
What would you expect about the beta of a company when it wants to change its cost structure
from higher fixed cost to lower fixed cost.
Choose one answer.

a. Beta will go up


b. Beta will go down


c. Beta will not change


d. Beta will not be affected.
Question 9
Marks: 1
The company have the capital structure D/E is 4/6 and the cooperate tax is 40%; Cost of equity is 10%; cost of
debt is 6%. The weighted average capital cost is :
Choose one answer.

a. 6.1%


b. None of the others

c. 7.4%


d. 8.4%

Question 10
Marks: 1
Youre valuing a Vietnamese firm in Vietnam dong. The current exchange rate = 21.000
VND/USD; and you have been able to obtain a ten year forward rate for 28.000 VND/USD.

If the U.S treasury bonds rate for 10 year is 5%, estimate the riskless rate for Vietnam dong.
Choose one answer.

a. 9.2%


b. 7.02%


c. 8 .06%

d. 6.05%

Question 11
Marks: 1
Baker Corp currently has 40 million USD in debt and 100 million USD in equity outstanding. Its
stock has a beta of 1.2. It plans use leverage buyout to buy another company and increase its
debt/asset ratio to 6/7. If the tax rate is 40%, what will the beta of Baker Corp after acquisition
deal? 6.chap 8
Choose one answer.

a. 3.4


b. 5.67

c. 2.5


d. 4.45
Question 12
Marks: 1
In the 2012 financial statements of ABC company, we have the following information:
Profit after taxes=100; Depreciation=10; Increase in current assets=20; Increase in current
liabilities=15; Capital expenditures (CAPEX=increase in fixed assets at cost)=15; After-tax net
interest= 10. The free cash flow of ABC in 2012 is:
Choose one answer.

a. 80


b. 90


c. 100


d. None of the others
Question 13
Marks: 1
You use a valuation model to arrive at a value of 20 USD for a stock. The market price of stock
is 25 USD. The difference may be explained by
Choose one answer. CHAP 1 PAGE 13.

a. D. None of the others


b. B. The use of the wrong valuation model to value the stock


c. E. Either A, B, C


d. C. Errors in the inputs to the valuation model


e. A. A market inefficiency; the market is overvaluing the stock
Question 14
Marks: 1
According to implied Risk premium method, if the stock index increase 5% and Treasury bond
rate decrease in this period 2%, what will happen to the implied equity risk premium?
Choose one answer.

a. Implied equity risk premium will not change

b. Implied equity risk premium will increase


c. None of the others


d. Implied equity risk premium will decrease

Question 15
Marks: 1
What statements is true?
Choose one answer.

a. Relative valuation models works best for investors who either have a long time horizon,
allowing the market time to correct its valuation mistakes and for price to revert to true
value


b. None of the others


c. Contingent valuation models works best for investors who either have a long time
horizon, allowing the market time to correct its valuation mistakes and for price to revert to
true value


d. Relative valuation models works best for investors who either have a short-term
investment, DFC models are suitable for long-term investment investors
Question 16
Marks: 1
To use discount cash flow valuation, you need to know:
Choose one answer.

a. cash flows during life of the asset

b. life of the asset


c. All of the others


d. discount rate to apply.

Question 17
Marks: 1
Which statements are true about valuation?
Choose one answer.

a. A good valuation provides a precise estimate of value


b. None of the others


c. The more quantitative a model, the better the valuation

d. A valuation is an objective search for true value

Question 18
Marks: 1
What we need to know to calculate the grow of earning from the main business of a firm when
we know ROC (return on capital)
Choose one answer.

a. ROE (Return on equity)

b. Marginal Tax rate


c. None of the others


d. Reinvestment rate

Question 19
Marks: 1
A stock has an expected return of 12 percent and a beta of 1.2. The risk free rate is 5 percent and
the expected return on the market is 10 percent. The stock is:
Choose one answer.

a. properly priced.


b. underpriced


c. answer cannot be determined with the information given.

d. overpriced

Question 20
Marks: 1
When historical risk premium is higher than the current implied equity risk premium, what
would you expect for the market if you believe in historical risk premium?
Choose one answer.

a. Market will not be affected by this new.

b. Market will go up


c. Market will stable


d. Market will go down