38) All else equal, which of the following represents the preferred outcome?

Question 38 options:

1)

A high ROE with high leverage

2)

A high ROE with low leverage

3)

A low ROE with high leverage

4)

A low coverage ratio with high leverage

39) Which of the following represents the total dollar return on your investment?

Question 39 options:

1)

Preferred gain plus dividend loss

2)

Preferred income plus dividend loss

3)

Dividend income plus capital gain or loss

4)

Dividend income plus preferred gain or loss

41) Which of the following statements regarding capital markets is FALSE?

Question 41 options:

1)

If one believes that markets are not efficient, i.e., inefficient, then he or she believes there is an opportunity to select stocks that will provide an excess profit.

2)

In the presence of volatility, the arithmetic return will be higher than the geometric return.

3)

The arithmetic return is likely to underestimate future wealth in the long run.

4)

An efficient market is a market in which security prices reflect available information

42) Which of the following is a likely consequence of using the WACC for all types of projects?

Question 42 options:

1)

Incorrectly accept relatively safe projects

2)

Incorrectly reject relatively risky projects

3)

Correctly accept relatively risky projects

4)

Incorrectly accept relatively risky projects

46) All else equal, there is a greater incentive to borrow for a company with which of the following?

Question 46 options:

1)

Lower tax rate

2)

Moderate tax rate

3)

Higher tax rate

4)

Tax exempt status

48) Which of the following refers to the real rate of return?

Question 48 options:

1)

The average nominal return minus the average rate of inflation

2)

The average nominal return minus the average Treasury bill return

3)

The square root of variance

4)

The difference between the arithmetic and geometric mean returns

50) All else equal, the use of debt is more attractive to companies with which of the following?

Question 50 options:

1)

Low volatility in earnings before interest and taxes

2)

High volatility in earnings per share

3)

High volatility in cash flows

4)

Moderate volatility in earnings per share