Exxon Mobil has 5% coupon bonds that are non-callable with a YTM of 6%. Which of the following is true?

Group of answer choices

The price will be at a discount to par

The price will be at par

It is impossible to determine

The price will be at a premium to par

Flag question: Question 2Question 2 3 pts

Use the following information to answer the next problem.

Security Return Standard Deviation Beta

A 10% 8% 1.50

B 14% 14% 1.05

Answer the following questions regarding securities A and B above: 1) Which security has the highest total risk? 2) Which security has the highest systematic (Market) risk?

Group of answer choices

Security B; Security A

Security A; Security A

Security B; Security B

Security A; Security B

Flag question: Question 3Question 3 3 pts

Your bank account pays a 12% nominal (annual) rate of interest. The interest is compounded semi-annually (2x per year). Which of the following statements is CORRECT?

Group of answer choices

The periodic rate of interest is 6% and the effective rate of interest is 6%

The periodic rate of interest is 6% and the effective rate of interest is 12%.

The periodic rate of interest is 6% and the effective rate of interest is less than 12%.

The periodic rate of interest is 6% and the effective rate of interest is greater than 12%.

Flag question: Question 4Question 4 3 pts

Stock A has an expected return of 10% and risk as measured by standard deviation of 20%

Stock B has an expected return of 15% and risk as measured by standard deviation of 30%

If the correlation between these stocks is negative, which of the following is likely true if we were to invest 50% in each?

Group of answer choices

The expected return is 12.5% and the risk is greater than 25%

The expected return is 12.5% and the risk is 25%

The expected return is 12.5% and the risk is less than 25%

It is impossible to determine

Flag question: Question 5Question 5 3 pts

Which of the following will result in a lower WACC?

Group of answer choices

Using retained earnings versus new equity issuance

Lower interest rates

Lower beta

All of these choices are correct

Flag question: Question 6Question 6 3 pts

Which of the following is NOT one of the three major decisions that the CFO faces?

Group of answer choices

Return to shareholders - managing dividends and share buybacks

Managing working capital

Financing - how to pay for the investments

Capital budgeting - where to invest

Flag question: Question 7Question 7 3 pts

The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to....

Group of answer choices

Minimize risk

Maximize shareholder value

Maximize accounting profit

Maximize market share

Flag question: Question 8Question 8 3 pts

The CFO of Will Industries plans to have the company issue $500 million of new 10% coupon bonds and use the proceeds to buy back their undervalued stock. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and its tax rate all remain constant. Which of the following would occur?

Group of answer choices

The company would pay more in taxes

The company's taxable income would fall

The company's risk (leverage) would decrease

The company would have more common equity than before

Flag question: Question 9Question 9 3 pts

Which of the following would theoretically increase the intrinsic value of a companys stock price if you are valuing it using the dividend discount model?

Group of answer choices

Lower beta

Higher interest rates

Lower payout ratio

Higher market risk premium

Flag question: Question 10Question 10 3 pts

Which of the following is one of the uses of free cash flow?

Group of answer choices

Buyback stock

Reinvest back into the company

Borrow money

All of these choices are correct

Flag question: Question 11Question 11 3 pts

William purchased a stock one year ago for $20, and it is now worth $17. The stock paid a dividend of $3 during the year. What is Williams total rate of return for this investment?

Group of answer choices

-15%

+30%

+15%

0%

Flag question: Question 12Question 12 3 pts

Which of the following below describes the crossover rate?

Group of answer choices

It is the IRR of combining two projects

It is the discount rate that produces identical NPVs for two projects

It is the rate at which an NBA player can do a crossover in a game

It is the rate at which the projects crosses over from a loss to a profit

Flag question: Question 13Question 13 3 pts

Which of the following events would make it more likely that a company would call its outstanding callable bonds (refinance)?

Group of answer choices

The Federal Reserve raises interest rates

The Federal Reserve lowers interest rates

The company's risk increases

Energy prices decrease

Flag question: Question 14Question 14 3 pts

A company has a beta of 1.5. Which of the following is true?

Group of answer choices

None of the choices are true

It's systematic risk is above average

It's systematic risk is average

It's systematic risk is below average

Flag question: Question 15Question 15 3 pts

Which of the following is a negative attribute of the payback method?

Group of answer choices

It ignores the time value of money

It ignores cash flows beyond the payback period

All of these choices are negative attributes of the payback

It does not measure the profitability of a project

Flag question: Question 16Question 16 3 pts

What is the future value of $10,000 invested for 5 years if the annual interest rate is 12% but interest is paid monthly?

Group of answer choices

$10,510.10

$18,166.97

$17,623.42

$8,975,969.33

Flag question: Question 17Question 17 3 pts

Given the following information, which project should be accepted if the project's are independent?

Project A: NPV of $10,000 and Payback of 3 years

Project B: NPV of $12,000 and Payback of 2.5 years

Group of answer choices

Project B

Neither Project A or B

Project A

Both Project A and B

Flag question: Question 18Question 18 3 pts

ABC has 6% 10 year bonds that are currently valued at $900. Which of the following is true?

Group of answer choices

The capital gains yield is positive

The capital gains yield is negative

The bond is undervalued

The bonds YTM is less than the coupon rate

Flag question: Question 19Question 19 3 pts

Which of the following is an example of an indirect transfer?

Group of answer choices

None of the choices are indirect transfers

Uber sell shares directly to investors

You deposit money in your local bank and they lend out the money

You lend money to a friend at a low interest rate

Flag question: Question 20Question 20 3 pts

In 2019, Company XYZ produced net income of $100,000. They paid out $120,000 in dividends during the year. Which if the following is true regarding the retained earnings account at the end of 2019 versus the end of 2018?

Group of answer choices

Retained earnings will have decreased

Retained earnings will be unchanged

Retained earnings will have increased

None of the above are true

Flag question: Question 21Question 21 3 pts

If the intrinsic value of the companys stock is greater than the market price, which of the following is the best course of action

Group of answer choices

The company should consider increasing its dividend

The company should consider buying back their shares

Shares should be issued to fund projects as the shares are overvalued

The company should consider merging with another company

Flag question: Question 22Question 22 3 pts

Which of the following is true?

Group of answer choices

As the WACC decreases, the IRR increases

As the WACC decreases, the NPV increases

As the WACC increases, the NPV increases

As the WACC increases, the IRR decreases

Flag question: Question 23Question 23 3 pts

ABC's current stock price is $100 and they do not pay a dividend. You expect that in 1 year that the stock will be $110. If the company's beta = 1.1, the risk free rate is 4% and the market risk premium [E(Rm) - Rf] = 6%, should you invest in the stock and why?

Group of answer choices

No, as per the CAPM it is undervalued

No, as per the CAPM it is overvalued

Yes, as per the CAPM it is undervalued

Yes, as per the CAPM it is overvalued

Flag question: Question 24Question 24 3 pts

One of the negatives of the internal rate of return is.....

Group of answer choices

It assumes reinvestment at the IRR

It assumes reinvestment at the WACC

It measures the annual % return for a given project

It is a simple measurement of risk

Flag question: Question 25Question 25 5 pts

Given the 2 projects below, calculate the cost of the capital that will produce identical NPV's

Each project is 3 years with an intial investment today of $50,000

Project A; CF1 = 20000, CF2 = 30000, CF3 = 40000

Project B: CF1 = 35000, CF2 = 30000, CF3 = 20000

Round your asnwer to 2 decimal places, omit the % symbol. Ex. 3.45