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Advanced Corporate Finance

Question 1 of 3

Q1 . P/E ratio?

A P/E ratio = Share Price/EPS

B P/E ratio = Profit/Number of Shares Outstanding

Q2 . Share Price ?

A Equty = Share Price * Shares Outstanding

B SP = Equty / Shares Outstanding

Q3 . Which of the following statements is false?

A The relationship between the investment term and the interest rate is called the term structure of interest rates.

B Real interest rates indicate the rate at which your money will grow if invested for a certain period.

C The yield curve is a potential leading indicator of future economic grow.

Q4 . Which of the followig statements is false?

A The interest rates that banks offer on investments or charge on loans depends on the horizon of the investment or loan.

B The Federal Reserve determines very short-term interest rates through its influence on the federal funds rate.

C Fundamentally, interest rates are determined by the Federal Reserve.

Q5 . Which of the following statements is false?

A Equity holders expect to receive dividends and the firm is legally obligated to pay them.

B A firm that fails to make the required interest or principal payment on the debt is in default.

C In the extreme case, the debt holders take legal ownership of firm`s assets through a process called bankruptcy.

D After a firm defaults, debt holders are given certain rights to the assets of the firm.

Q6 . Which of the following statements is regarding annuities is false?

B The difference between an annuity and perpetuity is that a perpetuity ends after some fixed number of payments.

C An annuity is a stream of N equal cash flows paid at regular intervals.

D Most car loans, mortgages, and some bonds are annuities.

Q7 . A voluntary reorganization of debts whereby a firm`s debt obligations are still expected to be paid in full but at a later than originally scheduled date, is called?

A A composition.

B An extention.

C Creditor control

D None of the above

Q8 . Which of the following statements is false?

A Most companies that pay dividends pay them semiannually.

B From an accounting perspective, dividends generally reduce the firm`s current (or accumulated) retained earnings.

C The way a firm chooses between paying dividends and retaining earnings is referred to as its payout policy.

D Occasionally, a firm may pay a one-time, special dividend that is usually much large than a regular dividend.

Q9 . The date on which the board authorizes the dividend is the:

A Declaration date.

B Distribution date.

C Record date.

D Ex-dividend date.

Q10 . Which of the following statements is false?

A Fundamentally, interest rates are determined by the Federal Reserve.

B The interest rates that are quoted by banks and other financial institutions are nominal interest rates.

C The Federal Reserve determines very short-term interest rates through its influence on the federal funds rate.

D The interest rates that banks offer on investment or charge on loans depends on the horizon of the investment or loan.

Q11 . Which of the following statements is false?

A The relationship between the investment term and the interest rate is called the term structure of the interest rate.

B Real interest rates indicate the rate at which your money will grow if invested for a certain period.

C The yiesd curve is a potential leading indicator of future economic grow.

D The shape of the yield curve will be strongly influenced by interest rate expectations.

Q12 . A(n)_________is the most common way that firms repurchase shares.

A Target repurchase

B Dutch auction share repurchse.

C Tender offer.

D Open market share repurchases.

Q13 . Which of the following statements regarding perpetuities is false?

A To find the value of a perpetuity one cash flow at a time would take forever.

B A perpetuity is a stream of equal cash flows that occur at regular intervals and last forever.

C PV of a perpetuity = r/C

D One example of a perpetuity is the British goverment bond called a consol.

Q14 . Anyone who purchases the stock on or after the______ date will not receive the devidend.

A Distribution.

B Ex-dividend.

C Record.

D Declaration.

Q15 . Which of the following statements is false?

A As firms mature, their earnings exeed their investment needs they begin to pay dividends.

B Total return = earnings * by the divident payout rate.

C Cutting the firm`s dividend to increase investment will raise the stock price if, and only if, the new investment have a positive NPV.

D We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth.

Q16 . One of methods to repurchase shares is the__________, in which the firm lists different prices at which it is prepared to buy shares, and shareholders in turn indicate how many shares they are willing to sell at each price.

A Dutch auction share repurchase.

B Tender offer.

C Targeted repurchase.

D Open market share repurchases.

Q17 . Which of the following statements is false?

A An important consequence of leverage is the risk of bankruptcy.

B Whether default occurs depends on the cash flow, not on the relative value of the firm`s assets and liabilities.

C Economic distress is a significant decline in the value of a firm`s assets, whether or not it experiences financial distress due to leverage.

D Modigliani and Miller`s results continue to hold in a perfect market even when debt is risky and the firm may default.

Q18 . A firm can repurchase shares through a(n)______ in which it offers to buy shares at a prespecified price during a short time period, generally within 20 days.

A Tender offer.

B Open market share repurchases.

C Target repurchase.

D Dutch auction share repurchase.

Q19 . The firm will pay the divident to all shareholders who are registered owners on a specific dare, set by the board, called the:

A Record date.

B Declaration date.

C Distribution date.

D Ex-dividend date.

Q20 . P/E ratio?

A P/E ratio = Share Price/EPS

B P/E ratio = Profit/Number of Shares Outstanding

Q21 . Share Price ?

A Equty = Share Price * Shares Outstanding

B SP = Equty / Shares Outstanding

Q22 . Which of the following statements is false?

A The relationship between the investment term and the interest rate is called the term structure of interest rates.

B Real interest rates indicate the rate at which your money will grow if invested for a certain period.

C The yield curve is a potential leading indicator of future economic grow.

Q23 . Which of the followig statements is false?

A The interest rates that banks offer on investments or charge on loans depends on the horizon of the investment or loan.

B The Federal Reserve determines very short-term interest rates through its influence on the federal funds rate.

C Fundamentally, interest rates are determined by the Federal Reserve.

Q24 . Which of the following statements is false?

A Equity holders expect to receive dividends and the firm is legally obligated to pay them.

B A firm that fails to make the required interest or principal payment on the debt is in default.

C In the extreme case, the debt holders take legal ownership of firm`s assets through a process called bankruptcy.

D After a firm defaults, debt holders are given certain rights to the assets of the firm.

Q25 . Which of the following statements is regarding annuities is false?

B The difference between an annuity and perpetuity is that a perpetuity ends after some fixed number of payments.

C An annuity is a stream of N equal cash flows paid at regular intervals.

D Most car loans, mortgages, and some bonds are annuities.

Q26 . A voluntary reorganization of debts whereby a firm`s debt obligations are still expected to be paid in full but at a later than originally scheduled date, is called?

A A composition.

B An extention.

C Creditor control

D None of the above

Q27 . Which of the following statements is false?

A Most companies that pay dividends pay them semiannually.

B From an accounting perspective, dividends generally reduce the firm`s current (or accumulated) retained earnings.

C The way a firm chooses between paying dividends and retaining earnings is referred to as its payout policy.

D Occasionally, a firm may pay a one-time, special dividend that is usually much large than a regular dividend.

Q28 . The date on which the board authorizes the dividend is the:

A Declaration date.

B Distribution date.

C Record date.

D Ex-dividend date.

Q29 . Which of the following statements is false?

A Fundamentally, interest rates are determined by the Federal Reserve.

B The interest rates that are quoted by banks and other financial institutions are nominal interest rates.

C The Federal Reserve determines very short-term interest rates through its influence on the federal funds rate.

D The interest rates that banks offer on investment or charge on loans depends on the horizon of the investment or loan.

Q30 . Which of the following statements is false?

A The relationship between the investment term and the interest rate is called the term structure of the interest rate.

B Real interest rates indicate the rate at which your money will grow if invested for a certain period.

C The yiesd curve is a potential leading indicator of future economic grow.

D The shape of the yield curve will be strongly influenced by interest rate expectations.

Q31 . A(n)_________is the most common way that firms repurchase shares.

A Target repurchase

B Dutch auction share repurchse.

C Tender offer.

D Open market share repurchases.

Q32 . Which of the following statements regarding perpetuities is false?

A To find the value of a perpetuity one cash flow at a time would take forever.

B A perpetuity is a stream of equal cash flows that occur at regular intervals and last forever.

C PV of a perpetuity = r/C

D One example of a perpetuity is the British goverment bond called a consol.

Q33 . Anyone who purchases the stock on or after the______ date will not receive the devidend.

A Distribution.

B Ex-dividend.

C Record.

D Declaration.

Q34 . Which of the following statements is false?

A As firms mature, their earnings exeed their investment needs they begin to pay dividends.

B Total return = earnings * by the divident payout rate.

C Cutting the firm`s dividend to increase investment will raise the stock price if, and only if, the new investment have a positive NPV.

D We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth.

Q35 . One of methods to repurchase shares is the__________, in which the firm lists different prices at which it is prepared to buy shares, and shareholders in turn indicate how many shares they are willing to sell at each price.

A Dutch auction share repurchase.

B Tender offer.

C Targeted repurchase.

D Open market share repurchases.

Q36 . Which of the following statements is false?

A An important consequence of leverage is the risk of bankruptcy.

B Whether default occurs depends on the cash flow, not on the relative value of the firm`s assets and liabilities.

C Economic distress is a significant decline in the value of a firm`s assets, whether or not it experiences financial distress due to leverage.

D Modigliani and Miller`s results continue to hold in a perfect market even when debt is risky and the firm may default.

Q37 . A firm can repurchase shares through a(n)______ in which it offers to buy shares at a prespecified price during a short time period, generally within 20 days.

A Tender offer.

B Open market share repurchases.

C Target repurchase.

D Dutch auction share repurchase.

Q38 . The firm will pay the divident to all shareholders who are registered owners on a specific dare, set by the board, called the:

A Record date.

B Declaration date.

C Distribution date.

D Ex-dividend date.

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