which type of business organization has all the respective rights and privileges of a legal person?
the principal-agent problem arises
in the management buyout, the managers of the firm buy out the existing stockholders and make the company a private firm. is this a way of reducing of conflict of interests between stockholders and managers?
in a corporation, the ultimate decisions regarding business matters are made by
which is not the advantages of a corporation?
which of the following statements is false?
which of the following assumptions would you need for stock maximization to be the “right” objective for a business to adopt?
which one is not the character a good goal should possess?
which one is not the assumption on which the maximization of stock price is based?
if shareholders are unhappy with a ceoʹs performance, they are most likely to
at an annual interest rate of 7%, the future value of $5,000 in five years is closest to:
at an annual interest rate of 7%, the present value of $5,000 received in five years is closest to:
which of the following statements is false?
which of the following statements is false?
which of the following statements regarding arbitrage is the most correct?
which of the following statements regarding the law of one price is incorrect?
walgreen company (nyse: wag) is currently trading at $48.75 on the nyse. walgreen company is also listed on nasdaq and assume it is currently trading on nasdaq at $48.50. does an arbitrage opportunity exists and if so how would you exploit it and how much would you make on a block trade of 100 shares?
suppose the risk free interest rate is 3.9%. the price per $100 face value of a three-year, zero-coupon, risk-free bond is closest to:
nogrowth industries presently pays an annual idend of $1.50 per share and it is expected that these idend payments will continue indefinitely. if nogrowth's equity cost of capital is 12%, then the value of a share of nogrowth's stock is closest to:
which of the following statements is false?
sarah palin reportedly was paid a $11 million advance to write her book going rogue. the book took one year to write. in the time she spent writing, palin could have been paid to give speeches and appear on tv news as a political commentator. given her popularity, assume that she could have earned $8 million over the year (paid at the end of the year) she spent writing the book. assume that she was unable to fulfill her media commitments of appearing on tv news as a political commentator or give speeches. while she was writing the book. assuming that palin's cost of capital is 10%, then the npv of her book deal is closest to:
sarah palin reportedly was paid a $11 million advance to write her book going rogue. the book took one year to write. in the time she spent writing, palin could have been paid to give speeches and appear on tv news as a political commentator. given her popularity, assume that she could have earned $8 million over the year (paid at the end of the year) she spent writing the book. assume that she was unable to fulfill her media commitments of appearing on tv news as a political commentator or give speeches. while she was writing the book. the irr of palin's book deal is closest to:
the npv profile
rearden metals is considering opening a strip mining operation to provide some of the raw materials needed in producing rearden metal. the initial purchase of the land and the associated costs of opening up mining operations will cost $100 million today. the mine is expected to generate $16 million worth of ore per year for the next 12 years. at the end of the 12th year rearden will need to spend $20 million to restore the land to its original pristine nature appearance. the number of potential irrs that exist for rearden's mining operation is equal to:
which of the following statements is false?
when using the internal rate of return (irr) investment rule, we compare:
consider the following two projects: alpha -79 20 25 30 35 40 n/a n/a beta -80 25 25 25 25 25 25 25 which of the following statements is correct if both are mutually exclusive? suppose the discount rate is 10%.
the internal rate of return rule can result in the wrong decision if the projects being compared have:
which of the following statements is false?
which of the following statements is false?
which of the following cash flows are relevant incremental cash flows for a project that you are currently considering investing in?
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
the value of currently unused warehouse space that will be used as part of a new capital budgeting project is:
which of the following statements is false?
which of the following statements is false?
use the following information to answer the question(s) below. beta volatility "eenie" 0.45 20% "meenie"0.75 18% "miney"1.05 35% "moe" 1.20 25% assume that the risk-free rate of interest is 3% and you estimate the market's expected return to be 9%. the equity cost of capital for "miney" is closest to:
based on above information, the risk premium for "meenie" is closest to:
equity in a firm with no debt is called:
which of the following statements is false?
suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. in this situation, the cash flow that equity holders will receive in one year in a strong economy is closest to:
which of the following statements is false?
suppose that rearden metal currently has no debt and has an equity cost of capital of 12%. rearden is considering borrowing funds at a cost of 6% and using these funds to repurchase existing shares of stock. assume perfect capital markets. if taggart borrows until they achieved a debt -to-equity ratio of 50%, then rearden's levered cost of equity would be closest to:
consider the following equation: e d = u = a the u in this equation represents:
which of the following statements is false?
the following equation: x = e/(e d) re d/(e d) rd can be used to calculate all of the following except:
galt industries has no debt, total equity capitalization of $600 million, and an equity beta of 1.2. included in galt's assets is $90 million in cash and risk-free securities. assume the risk-free rate is 4% and the market risk premium is 6%. galt's enterprise value is closest to:
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
which of the following is not an indirect cost of bankruptcy?
which of the following is not a direct cost of bankruptcy?
which of the following statements is false?
the idea that claims in one's self-interest are credible only if they are supported by actions that would be too costly to take if the claims were untrue is known as the:
which of the following influences a firm's choice of capital structure?
1. which of the following is not one of the simplifying assumptions made for the three main methods of capital budgeting?
2. which of the following statements is false?
3. which of the following is not a step in the wacc valuation method?
4.which of the following statements is false?
5. suppose luther industries is considering esting one of its product lines. the product line is expected to generate free cash flows of $2 million per year, growing at a rate of 3% per year. luther has an equity cost of capital of 10%, a debt cost of capital of 7%, a marginal tax rate of 35%, and a debt-equity ratio of 2. this product line is of average risk and luther plans to maintain a constant debt-equity ratio. luther's unlevered cost of capital is closest to:
6. which of the following statements is false?
7. which of the following is not a step in valuation using the flow to equity method?
8. which of the following statements is false?
9. which of the following questions is false?
10. which of the following statements is false?
a(n) ________ is the most common way that firms repurchase shares.
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
which of the following questions is false?
iota industries is an all-equity firm with 50 million shares outstanding. iota has $200 million in cash and expects future free cash flows of $75 million per year. management plans to use the cash to expand the firm's operations, which in turn will increase future free cash flows by 12%. iota's cost of capital is 10% and assume that capital markets are perfect. the value of iota if they use the $200 million to expand is closest to:
if the risk-free rate of interest (rf) is 3.5%, then you should be indifferent between receiving $1000 in one-year or:
which of the following statements regarding arbitrage and security prices is incorrect?
consider two securities, a & b. suppose a third security, c, has the same cash flows as a and b combined. given this information about securities a,b, & c, which of the following statements is incorrect?
suppose a ten-year bond with semiannual coupons has a price of $1,071.06 and a yield to maturity of 7%. this bond's coupon rate is closest to:
consider a zero coupon bond with 20 years to maturity. the price will this bond trade if the ytm is 6% is closest to:
von bora corporation (vbc) is expected to pay a $2.00 idend at the end of this year. if you expect vbc's idend to grow by 5% per year forever and vbc's equity cost of capital is 13%, then the value of a share of vbs stock is closest to:
which of the following statements is false?
consider a project with the following cash flows: year cash flow 0 -10,000 1 4,000 2 4,000 3 4,000 4 4,000 if the appropriate discount rate for this project is 15%, then the npv is closest to:
which of the following statements is false?
consider the following two projects: project year 0 c/f year 1 c/f year 2 c/f year 3 c/f year 4 c/f year 5 c/f year 6 c/f year 7 c/f discount rate alpha -79 20 25 30 35 40 n/a n/a 15% beta -80 25 25 25 25 25 25 25 15% the internal rate of return (irr) for project alpha and project beta are closest to:
consider the following two projects: alpha -79 20 25 30 35 40 n/a n/a 15% beta -80 25 25 25 25 25 25 25 15% project year 0 c/f year 1 c/f year 2 c/f year 3 c/f year 4 c/f year 5 c/f year 6 c/f year 7 c/f discount rate alpha -79 20 25 30 35 40 n/a n/a 15% beta -80 25 25 25 25 25 25 25 15% which of the following statements is correct if both are mutually exclusive?
which of the following statements is false?
consider two mutually exclusive projects a & b. if you subtract the cash flows of opportunity b from the cash flows of opportunity a, then you should:
which of the following statements is false?
a decrease in the sales of a current project because of the launching of a new project is:
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
which of the following costs would you consider when making a capital budgeting decision?
money that has been or will be paid regardless of the decision whether or not to proceed with the project is:
which of the following statements is false?
use the following information to answer the question(s) below. beta volatility "eenie" 0.45 20% "meenie"0.75 18% "miney"1.05 35% "moe" 1.20 25% assume that the risk-free rate of interest is 3% and you estimate the market's expected return to be 9%.which firm has the most total risk?
use the following information to answer the question(s) below. beta volatility "eenie" 0.45 20% "meenie"0.75 18% "miney"1.05 35% "moe" 1.20 25% based on above information, which firm has the highest cost of equity capital?
if the risk-free rate of interest (rf) is 3.5%, then you should be indifferent between receiving $1000 in one-year or:
which of the following statements is false?
consider two mutually exclusive projects a & b. if you subtract the cash flows of opportunity b from the cash flows of opportunity a, then you should:
which of the following statements is false?
which of the following statements is false?
which of the following statements is false?
consider the following equation: e d = u = a the u in this equation represents:
which of the following statements is false?
which of the following statements is false?
which of the following methods are used in capital budgeting decisions?