# Exam3 FIN370 Winter 2012 Key

Version

A

1. You are considering the following two mutually exclusive projects. The crossover point is _____ percent.

A. 11.89 B. 13.75 C. 9.25 D. 12.08 E. 7.76

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: INTERMEDIATE Ross - Chapter 008 #89 SECTION: 8.4 TOPIC: NPV PROFILE TYPE: PROBLEMS

2. M&A, Inc. maintains a constant debt-equity ratio of .4. The firm had net income for the year of \$140,000 and paid \$98,000 in dividends. The firm has total assets of \$700,000. What is the maximum sustainable growth rate of the firm given this information? A. 6.38 percent B. 9.17 percent C. 16.28 percent D. 24.38 percent E. 18.62 percent

BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: INTERMEDIATE Ross - Chapter 003 #103 SECTION: 3.4 TOPIC: SUSTAINABLE GROWTH RATE TYPE: PROBLEMS

3. The future value of a series of cash flows over time can be computed by: A. discounting each of the individual cash flows and summing the results. B. summing the amount of each of the individual cash flows and multiplying the summation by (1 + r)t, where t equals the total number of cash flows. C. computing the future value of the middle cash flow and multiplying that amount by the number of cash flows. D. summing the future values of each of the individual cash flows. E. multiplying each individual cash flow by (1 + rt) and summing the results.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 005 #8 SECTION: 5.1 TOPIC: FUTURE VALUE TYPE: CONCEPTS

4. Over the period of 1926-2006: A. large-company stocks outperformed all other investment categories. B. long-term government bonds underperformed long-term corporate bonds. C. inflation exceeded the rate of return on U.S. Treasury bills. D. small-company stocks underperformed large-company stocks. E. U.S. Treasury bills outperformed long-term government bonds.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 010 #15 SECTION: 10.3 TOPIC: HISTORICAL RETURNS TYPE: CONCEPTS

5. Preferred stock: I. generally has a fixed dividend. II. generally has a dividend that increases annually. III. receives preference in bankruptcy over bonds. IV. receives preference in bankruptcy over common stock. A. I and III only B. I and IV only C. II and III only D. II and IV only E. I only

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 007 #9 SECTION: 7.2 TOPIC: PREFERRED STOCK TYPE: DEFINITIONS

07 B.Chapter 011 #75 SECTION: 11.000 D.6.Chapter 009 #49 SECTION: 9.500 E.26 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross .267. 1. Boone Brothers is now considering building a hotel on the site as the auto dealer is relocating to make room for a nearby shopping mall to expand.2 TOPIC: OPPORTUNITY COST TYPE: PROBLEMS . \$0 B. You have a portfolio comprised of the following.12 D. What is your portfolio beta? A. 1.14 million. Boone Brothers has no loans or mortgages secured by the property. \$519.000 C.500. Boone Brothers purchased a parcel of land 8 years ago for \$392.23 C. \$1.140. At that time.18 E.000 modifying the site so that it could be leased to an adjacent car dealer for displaying used car inventory. What value should be included in the initial cost of the hotel project for the use of this land? A.000 a year. \$828. The lease payment was \$39. The current value of the land is \$1. 1.6 TOPIC: PORTFOLIO BETA TYPE: PROBLEMS 7. 1.000 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . 1. the firm invested \$127. \$1.

it is selling this freezer for \$32. Fidel's Forestry has a return on assets of 7. 16.4 TOPIC: AFTERTAX SALVAGE VALUE TYPE: PROBLEMS .50 percent D.210.08 B. a total asset turnover rate of 1.2.000. and a debt-equity ratio of 1.84 D.95 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross .403.900.5 percent. 26. \$4. What is the aftertax cash flow from this sale if the tax rate is 32 percent? The MACRS allowance percentages are as follows: A.50 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross . What is the return on equity? A.00 percent B.Chapter 009 #80 SECTION: 9. Today.87 C. The Corner Market purchased a commercial freezer 3 years ago for \$48. 26. 12. \$5. 16.8.40 percent E. \$26.20 E.496.40 percent C. \$28.3 TOPIC: RETURN ON EQUITY TYPE: PROBLEMS 9.602. \$24.477.Chapter 003 #91 SECTION: 3.6.

-3.50 percent E. An annuity due has payments that occur at the beginning of each time period. B. If unspecified. C.2 TOPIC: ANNUITY TYPE: CONCEPTS .Chapter 011 #50 SECTION: 11. -7.3 percent. Given the information below.50 percent D. 15.00 percent C. The future value of an annuity decreases as the interest rate increases. BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross . D.Chapter 005 #15 SECTION: 5. -15.10. you should assume an annuity is an annuity due.00 percent B. The present value of an annuity is equal to the annuity amount multiplied by the number of annuity payments. The stock of Home Office has an expected return of 9.75 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . what is the expected return if the economy is in a recession? A. An annuity is an unending stream of equal payments occurring at equal intervals of time.1 TOPIC: EXPECTED RETURN TYPE: PROBLEMS 11. Which one of the following statements concerning annuities is correct? A. 7. E.

6 TOPIC: FISHER EFFECT TYPE: PROBLEMS .74 percent B. 16.12.000232 C. . 10.Chapter 011 #70 SECTION: 11.96 percent E. Interest is compounded on a quarterly basis. What is the effective annual rate? A. what is the variance of a portfolio that is invested 25 percent in both stocks A and C.005285 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross . and 50 percent in stock B? A. 5. . 17.64 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: INTERMEDIATE Ross .2 TOPIC: PORTFOLIO VARIANCE TYPE: PROBLEMS 13.3 TOPIC: EFFECTIVE ANNUAL RATE TYPE: PROBLEMS 14. you earned a rate of return of 7. Last year.001414 B.08 percent C. .71 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross .Chapter 006 #107 SECTION: 6. .59 percent E.15 percent.000025 E. 16. Given the following information. as required by law. 19.86 percent on your bond investments.2 percent. During that time. states that a credit card has an interest rate of 18. the inflation rate was 2.84 percent B.000106 D. 5. 7. 19.29 percent C. 5. What was your real rate of return? A.48 percent D. . A loan disclosure.Chapter 005 #88 SECTION: 5.01 percent D.

\$44. security that has a beta equal to the market beta.0347 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross .Chapter 010 #62 SECTION: 10.4 TOPIC: VARIANCE TYPE: PROBLEMS . B. -22.0268 E. . a stock returned 9.000. \$9. type of risk-free asset. What is the variance of these returns? A. \$10.15.000 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross . .2 TOPIC: PORTFOLIO TYPE: DEFINITIONS 17.000. increase fixed assets by \$46. 19.8 percent.000.000 E.6 percent.2 TOPIC: NET WORKING CAPITAL TYPE: PROBLEMS 16. and decrease inventory by \$17. new issue of securities that are being offered to the public.8 percent.000.Chapter 009 #54 SECTION: 9. . E. Over the past five years.0394 B.2 percent and 4.6 percent. What is the amount the firm should use as the initial cash flow attributable to net working capital when it analyzes this project? A. D.0250 D. increase accounts payable by \$19.Chapter 011 #2 SECTION: 11. asset that has a beta greater than 1. . \$63. Junior's has a new project in mind that will increase accounts receivable by \$27.0.0381 C.000 C. . group of assets held by an investor.000 D. C. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross .000 B. -3. \$109. A portfolio is a(n): A.

26. A. opportunity E. The analysis of the effects that what-if questions have on the net present value of a project is called _____ analysis.Chapter 010 #58 SECTION: 10. scenario B.18. when you purchased shares of that stock at \$40 a share.48 percent D. the dividend yield was 6.5 percent. What is your total real return on this investment? A.09 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross .87 percent B.8 percent and you just sold all of your shares. 31. the required return on this stock is 9.Chapter 009 #10 SECTION: 9. Over this past year. the inflation rate has been 3.67 percent C. Today. Mountain Minerals pays a constant annual dividend. One year ago.43 percent E. erosion D.6 TOPIC: SCENARIO ANALYSIS TYPE: DEFINITIONS . 25. benefit C.1 TOPIC: REAL RETURN TYPE: PROBLEMS 19. 23.2 percent. 29. sensitivity BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross .

average accounting return.606 E. \$2.Chapter 002 #98 SECTION: 2.731.Chapter 008 #5 SECTION: 8.872. Preston.20. \$5.087 BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: INTERMEDIATE Ross .087 C. yield to maturity.731. has compiled the following information: In whole dollars. \$3. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross . The discount rate that causes the net present value of a project to equal zero is called the: A. D. internal rate of return. \$4. \$3. B. \$3. required return.4 TOPIC: OPERATING CASH FLOW TYPE: PROBLEMS 21. C. \$5.4 TOPIC: INTERNAL RATE OF RETURN TYPE: DEFINITIONS .262 B.279 D. \$2. Inc. \$5. the operating cash flow for 2007 is _____ and for 2008 it is _____.427. \$4. A. E. market rate.996.

IV. II and IV only B. net present value.82 years BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross .53 years D. A project has the following cash flows. 1. cash flow.22. 1. I and IV only C. and IV only BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross . II. I.Chapter 008 #1 SECTION: 8. and III only D. C. III. What is the payback period? A. 1. Unsystematic risk: I. affects a limited number of assets. 1. The difference between an investment's market value and its cost is called the: A. net income. D. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross . II. is also called asset-specific risk.77 years B.1 TOPIC: NET PRESENT VALUE TYPE: DEFINITIONS 23.4 TOPIC: UNSYSTEMATIC RISK TYPE: DEFINITIONS 24. E. A. is also called unique risk. 1.31 years E. I and III only E.2 TOPIC: PAYBACK TYPE: PROBLEMS .Chapter 008 #62 SECTION: 8. capital value. II. B. affects a large number of assets.Chapter 011 #5 SECTION: 11. I.48 years C. present value.

Chapter 004 #14 SECTION: 4. cost of expanding the showroom to make space for the new baskets A.2 TOPIC: ASSET UTILIZATION TYPE: CONCEPTS 27. II and IV only B. I.Chapter 003 #20 SECTION: 3. and IV only E. III. II and III only D.Chapter 009 #18 SECTION: 9. FV = PV / (1 + r)t C. II. an increase in the cash ratio B.1 TOPIC: FUTURE VALUE TYPE: CONCEPTS .25. a decrease in the inventory turnover rate E. FV = PV (1 + r)t E. Woven Goods is considering adding a new line of baskets to its product line-up. I and IV only C. a decrease in days' sales in receivables D. an increase in the profit margin BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross . a decrease in the capital intensity ratio C. Which one of the following is the correct formula for the future value of a lump sum invested today? A. Which one of the following indicates a firm is utilizing its assets less efficiently than it has in the past? A. money spent to date investigating the availability of woven baskets IV. II. FV = PV / (1 + rt) B. increased revenue from existing goods if these baskets are added to the lineup II. Which of the following are relevant cash flows for this project? I. revenue from the new line of baskets III.1 TOPIC: RELEVANT CASH FLOWS TYPE: CONCEPTS 26. FV = PV rt D. and IV only BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . FV = PV (1 + t)r BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross .

Chapter 011 #15 SECTION: 11. 7 percent. D. E. A security produced returns of 8 percent. security's return plus the market rate of return. and 16 percent over the past five years. what is the probability that this stock will earn more than 15. BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross . A security's risk premium is equal to the: A. D.4 TOPIC: PROBABILITY RANGE TYPE: PROBLEMS . 2. C.5 percent B.0 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: INTERMEDIATE Ross . 13 percent.46 percent in any one given year? A. 16. expected return plus the risk-free rate. a marginal cost. -3 percent. 17.0 percent C.1 TOPIC: RISK PREMIUM TYPE: CONCEPTS 30. security's return minus the market rate of return. B. a side effect. C. E. expected return minus the risk-free rate. 12. a sunk cost. an opportunity cost.Chapter 010 #72 SECTION: 10.2 TOPIC: OPPORTUNITY COST TYPE: DEFINITIONS 29.28. The most valuable alternative that is forfeited if a particular investment is undertaken is called: A. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . B. 5.Chapter 009 #4 SECTION: 9. Based on these five years.5 percent D. market rate minus the inflation rate.0 percent E. erosion. respectively.

Which one of the following statements is correct? A. B. is a systematic event and thus has no effect on the price of the firm's stock. The payback rule is biased in favor of short-term investments. is inversely related to the period of time. is directly related to the interest rate. D. B. E. DL Industries just called a press conference and is now announcing that the firm is restructuring and will be closing two manufacturing facilities. will have no effect on the firm's stock price if the announcement was expected. will definitely cause the firm's stock price to decline.4 TOPIC: ANNOUNCEMENT TYPE: CONCEPTS 33. D.Chapter 004 #23 SECTION: 4. B.2 TOPIC: PAYBACK TYPE: CONCEPTS .Chapter 011 #23 SECTION: 11.Chapter 008 #18 SECTION: 8. The payback rule works best when applied to mutually exclusive decisions.31. is unaffected by the interest rate. is inversely related to the future value. will definitely cause the firm's stock price to increase. The payback rule states that you should accept a project if the payback period is less than one year. BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross . E. BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross . will have no effect on the firm's stock price whether or not the announcement was expected. C. BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . The payback period is computed based on the present value of each of a project's cash flows. D. C. is unaffected by the timing of the future cash flow. E. The payback period considers the timing and amount of all of a project's cash flows. This announcement: A. The present value of a lump sum future amount: A.2 TOPIC: PRESENT VALUE TYPE: CONCEPTS 32. C.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . A project has the following cash flows. 17.34.23 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross . C. The term secondary markets refers to electronic exchanges that do not have a physical location. amount paid to a bond dealer when a bond is purchased.6 TOPIC: SECONDARY MARKETS TYPE: CONCEPTS .96 percent C.4 TOPIC: INTERNAL RATE OF RETURN TYPE: PROBLEMS 36. What is the internal rate of return? A. difference between the bid and ask price. E.1 TOPIC: COUPON TYPE: DEFINITIONS 35. 19. The secondary markets are those that conduct business over-the-counter only. annual interest divided by the current bond price. D. 15. 11. The coupon is the: A. Which one of the following statements is correct concerning the secondary markets? A. 13. C. E. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross . D.51 percent D.Chapter 001 #54 SECTION: 1. stated interest payment on a bond.Chapter 008 #80 SECTION: 8.Chapter 006 #1 SECTION: 6. B. The secondary markets are limited to auction markets.08 percent B.64 percent E. B. Secondary markets can be either dealer or auction markets. amount of discount received when a bond is purchased. Secondary markets are all auction markets such as the NYSE and NASDAQ.

downer. D. B. "3B" bond. is inversely related to the discount rate.Chapter 008 #12 SECTION: 8. The net present value: A. split rated bond. eroded B. converted bond. incremental D.1 TOPIC: INCREMENTAL CASH FLOWS TYPE: DEFINITIONS 39. C. B. direct BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross . increases as the required rate of return increases. BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: INTERMEDIATE Ross . E.3 TOPIC: FALLEN ANGEL TYPE: CONCEPTS . fallen angel.37. residual C. is equal to the initial investment when the internal rate of return is equal to the required return. A. D. method of analysis cannot be applied to mutually exclusive projects. C. The change in a firm's future cash flows that results from adding a new project are referred to as _____ cash flows. deviated E.Chapter 006 #56 SECTION: 6. E. is unaffected by the timing of the related cash flows. A bond that was previously rated as investment grade but has fallen to junk status is commonly referred to as a: A.Chapter 009 #1 SECTION: 9.1 TOPIC: NET PRESENT VALUE TYPE: CONCEPTS 38.

II. Which of the following affect the current price of a stock? I. The situation that exists when the units within a business are allotted a fixed amount of money for capital budgeting is referred to as: A.7 TOPIC: SOFT RATIONING TYPE: DEFINITIONS . B.S. long-term corporate bonds BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross .3 TOPIC: HISTORICAL STANDARD DEVIATION TYPE: CONCEPTS 42. expected dividend next year A. large-company stocks B. I. D. I. long-term government bonds C.1 TOPIC: STOCK PRICE TYPE: CONCEPTS 41.40. II and IV only D. dividend growth rate II. E. I and III only BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . dividend paid this year IV. U. required return III. inflation D. allocated planning. and IV E. Which one of the following had the lowest standard deviation for the period of 1926 -2006? A. III. strategic planning. II. III. and IV only C. hard rationing.Chapter 009 #16 SECTION: 9. Treasury bill E.Chapter 010 #18 SECTION: 10. II. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEVEL OF DIFFICULTY: BASIC Ross . and IV only B. soft rationing. sunk funding.Chapter 007 #24 SECTION: 7. C.

are efficient is called the: A.0 B. Which of the following are measures associated with the risk of an investment? I. risk-free rate A. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross . I. efficient markets hypothesis. C. I. II. II and IV only BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . market equalization hypothesis. a positive accounting rate of return D. III. financial markets hypothesis. capital market hypothesis. Fisher effect. Which one of the following indicates a project has a rate of return that exceeds its required return? A.Chapter 008 #10 SECTION: 8. risk premium IV. IV B. a PI less than 1. a payback period that exceeds the required period BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross .Chapter 010 #26 SECTION: 10.6 TOPIC: EFFICIENT MARKETS HYPOTHESIS TYPE: DEFINITIONS . III. II. I and III only E. an AAR that is less than the required rate C.4 TOPIC: RISK TYPE: CONCEPTS 44. and IV only C. E. The hypothesis that stock markets. standard deviation II. I. such as the NYSE. a positive NPV E.Chapter 010 #7 SECTION: 10. mean III.43. D. B.1 TOPIC: NET PRESENT VALUE TYPE: CONCEPTS 45. and III only D.

What is the project's operating cash flow? A. D. required return. average actual return. C. risk premium.17 D.411.409. Agency Law of 2005 D.75 B.30 E. proxy fight B. Sarbanes-Oxley Act of 2002 C.000 tops annually.Chapter 010 #1 SECTION: 10.3 TOPIC: RISK PREMIUM TYPE: DEFINITIONS 47.000 a year and the fixed costs are \$58. \$28. \$24.75 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross . BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross .508. The Stop Shoppe currently sells blue jeans and T-shirts. \$7 on the T-shirts.Chapter 009 #68 SECTION: 9. The variable cost per unit is \$28 on the jeans. B.22 C.608. real return. management feels the firm will sell an additional 975 pairs of jeans at \$49 a pair and 400 fewer T-shirts at \$12 each.604. corporate takeover E. The tax rate is 35 percent. \$16. corporate restructure BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross . \$32. By adding the fleece tops.4 TOPIC: OPERATING CASH FLOW TYPE: PROBLEMS 48. and \$16 on the fleece tops. The excess return required on a risky investment over that of a risk-free investment is called the: A. Which one of the following is used by company shareholders to replace company management and gain control of the firm? A.46.5 TOPIC: FIRM CONTROL TYPE: CONCEPTS . The tops would sell for \$29 each with expected sales of 6.Chapter 001 #49 SECTION: 1. The depreciation expense is \$36. E. \$37. Management is considering adding fleece tops to its inventory to provide a cooler weather option. inflation premium.000 annually.

standard deviation.034 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross .000 shares of stock outstanding with a current market value of \$34 a share. \$880. \$1. has 220. You own 40. \$510.Chapter 007 #86 SECTION: 7. The firm uses a cumulative voting system.367 E.2 TOPIC: CUMULATIVE VOTING TYPE: PROBLEMS 50. \$1. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 3 LEVEL OF DIFFICULTY: BASIC Ross . D.034 C.870. mean. Inc.000 D. E.Chapter 011 #8 SECTION: 11. \$1. C. Next month.034 B. beta coefficient. The amount of systematic risk present in a particular risky asset relative to that in an average risky asset is called the: A.6 TOPIC: BETA COEFFICIENT TYPE: DEFINITIONS .133.000 of those shares. Tullio. variance. How much additional money do you need to spend to guarantee that you will be elected to the board assuming that everyone else votes for one of the other candidates? A.49. the election will be held to select three new members to the board of directors.360. risk premium. B.

906. should be negative when the number of shares of stock issued remains constant for the period. \$18.353. \$8. is negative when a firm increases its borrowing to finance a new business venture.2 TOPIC: PRESENT VALUE TYPE: PROBLEMS 52.151. You and your brother are planning a large anniversary party 5 years from today for your grandparents' 50th wedding anniversary. \$8. \$7. How much would you and your brother have to deposit today in one lump sum to pay for the entire party? A.11 B.51. \$1.19 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross . \$529. measures the cash flow between a firm and its debtors. \$8.820.383.21 C.13 E.19 D. D.26 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross .Chapter 002 #52 SECTION: 2. \$7. \$3. \$19.Chapter 008 #59 SECTION: 8.853.397. B.24 C. BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC Ross .000 for this party.34 D. C.26 B. is equal to the cash flow from assets plus the cash flow to creditors. E.4 TOPIC: CASH FLOW TO STOCKHOLDERS TYPE: CONCEPTS .175.1 TOPIC: NET PRESENT VALUE TYPE: PROBLEMS 53.Chapter 004 #47 SECTION: 4. You can earn 4 percent compounded annually on your savings. is positive when the amount of the dividends paid exceeds the amount of net new equity raised.638.51 E. What is the net present value of the following cash flows if the relevant discount rate is 7 percent? A. You have estimated that you will need \$9. Cash flow to stockholders: A.

7 TOPIC: REWARD-TO-RISK RATIO TYPE: PROBLEMS . Stock A has a beta of 1. total debt of \$15. The NYSE has the most stringent listing requirements.Chapter 002 #56 SECTION: 2. BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEVEL OF DIFFICULTY: INTERMEDIATE Ross .89 percent B.8 and an expected return of 12 percent.Chapter 001 #59 SECTION: 1.200 D. C.300 B. Stock B has a beta of . 14.500 E.54.800 C.Chapter 011 #83 SECTION: 11. The majority of the publicly traded firms in the U.S. NASDAQ is an auction market. The Bake Shoppe has net working capital of \$6. 16. B. and owners' equity of \$18. 20. The NYSE is a dealer market. 18.1 TOPIC: NET FIXED ASSETS TYPE: PROBLEMS 56.5 percent? A.46 percent D.44 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: INTERMEDIATE Ross . \$18. \$12. Which one of the following statements is correct? A.7 and has the same reward-to-risk ratio as stock B. long-term debt of \$10. are listed on the NYSE.400.6 TOPIC: STOCK EXCHANGES TYPE: CONCEPTS 55.97 percent E. The trading floor for NASDAQ is located in Chicago.200. \$23. D. What is the expected return on stock A if the risk-free rate is 4.100.900 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEVEL OF DIFFICULTY: INTERMEDIATE Ross .900. What is the value of The Bake Shoppe's net fixed assets? A. 12. \$21.67 percent C. \$16. E.

more constant D. higher E. lower. higher BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross . the _____ the expected rate of return and the _____ the risk. lower C. lower B.Chapter 010 #31 SECTION: 10. The lower the standard deviation of a security. higher. A. more constant.57.4 TOPIC: RISK AND RETURN TYPE: CONCEPTS . higher. lower.

1 SECTION: 10.Chapter 009 Ross .1 SECTION: 4.4 SECTION: 4.4 SECTION: 10.Chapter 008 Ross .Chapter 003 Ross .6 SECTION: 11.3 SECTION: 6.6 SECTION: 11.4 SECTION: 3.Exam3 FIN370 Winter 2012 Summary Category BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS BLOOMS TAXONOMY QUESTION TYPE: APPLICATION BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEARNING OBJECTIVE NUMBER: 2 LEARNING OBJECTIVE NUMBER: 3 LEARNING OBJECTIVE NUMBER: 4 LEVEL OF DIFFICULTY: BASIC LEVEL OF DIFFICULTY: INTERMEDIATE Ross .7 SECTION: 2.Chapter 001 Ross .3 SECTION: 10.1 SECTION: 11.5 SECTION: 1.2 SECTION: 3.2 SECTION: 5.4 SECTION: 11.3 SECTION: 3.Chapter 005 Ross .Chapter 011 SECTION: 1.Chapter 007 Ross .2 SECTION: 5.1 # of Questions 2 22 11 22 19 10 12 12 41 16 3 3 3 3 3 3 3 9 9 9 9 1 2 1 3 4 1 2 2 2 2 1 1 2 1 1 1 1 2 1 1 1 1 .1 SECTION: 5.Chapter 002 Ross .2 SECTION: 11.Chapter 004 Ross .1 SECTION: 2.6 SECTION: 10.Chapter 006 Ross .Chapter 010 Ross .

4 SECTION: 9.1 SECTION: 8.2 SECTION: 8.1 SECTION: 7.2 SECTION: 9.6 SECTION: 7.SECTION: 6.6 SECTION: 9.7 TOPIC: AFTERTAX SALVAGE VALUE TOPIC: ANNOUNCEMENT TOPIC: ANNUITY TOPIC: ASSET UTILIZATION TOPIC: BETA COEFFICIENT TOPIC: CASH FLOW TO STOCKHOLDERS TOPIC: COUPON TOPIC: CUMULATIVE VOTING TOPIC: EFFECTIVE ANNUAL RATE TOPIC: EFFICIENT MARKETS HYPOTHESIS TOPIC: EXPECTED RETURN TOPIC: FALLEN ANGEL TOPIC: FIRM CONTROL TOPIC: FISHER EFFECT TOPIC: FUTURE VALUE TOPIC: HISTORICAL RETURNS TOPIC: HISTORICAL STANDARD DEVIATION TOPIC: INCREMENTAL CASH FLOWS TOPIC: INTERNAL RATE OF RETURN TOPIC: NET FIXED ASSETS TOPIC: NET PRESENT VALUE TOPIC: NET WORKING CAPITAL TOPIC: NPV PROFILE TOPIC: OPERATING CASH FLOW TOPIC: OPPORTUNITY COST TOPIC: PAYBACK TOPIC: PORTFOLIO TOPIC: PORTFOLIO BETA TOPIC: PORTFOLIO VARIANCE TOPIC: PREFERRED STOCK TOPIC: PRESENT VALUE TOPIC: PROBABILITY RANGE TOPIC: REAL RETURN TOPIC: RELEVANT CASH FLOWS TOPIC: RETURN ON EQUITY TOPIC: REWARD-TO-RISK RATIO TOPIC: RISK TOPIC: RISK AND RETURN 1 1 1 2 4 2 3 2 3 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 2 1 4 1 1 2 2 2 1 1 1 1 2 1 1 1 1 1 1 1 .3 SECTION: 6.1 SECTION: 9.2 SECTION: 8.4 SECTION: 9.

TOPIC: RISK PREMIUM TOPIC: SCENARIO ANALYSIS TOPIC: SECONDARY MARKETS TOPIC: SOFT RATIONING TOPIC: STOCK EXCHANGES TOPIC: STOCK PRICE TOPIC: SUSTAINABLE GROWTH RATE TOPIC: UNSYSTEMATIC RISK TOPIC: VARIANCE TYPE: CONCEPTS TYPE: DEFINITIONS TYPE: PROBLEMS 2 1 1 1 1 1 1 1 1 21 13 23 .