Question
please help me 1)Agency problem in corporate finance means: Select one: a. Conflict between firms and government agencies like IRS b. Conflict between bondholders and
please help me
1)Agency problem in corporate finance means:
Select one:
a. Conflict between firms and government agencies like IRS
b. Conflict between bondholders and shareholders
c. conflict between shareholders and management of the company
d. All of the above
2) If interest rate is 10%, what is present value of a $100 perpetuity?
Select one:
a. $1000
b. $110
c. $10,000
d. None of the above
3) When you invest in a business, the required rate of return for you should be at least equal to:
Select one:
a. risk of that business
b. Your opportunity cost
c. Your sunk cost
d. The risk free rate
4) If you buy a stock for P dollars today and sell it for Q dollars tomorrow (ignore transaction cost etc.)
what is your rate of return?
Select one:
a. P/Q
b. Q/P -1
c. Q/P
d. Q - P
5) Interest expense is paid after net income is calculated.
Select one:
a. False
b. It depends on depreciation
c. True
d. It depends on free cash flow
6) Return on investment is proportional to:
Select one:
a. Systematic risk
b. Idiosyncratic risk
c. diversifiable risk
d. a & c
7) Coupon of a bond is always ......
Select one:
a. None of the above
b. less than its yield to maturity
c. Same as its 'yield to maturity'
d. more than its yield to maturity
8) If E is Equity and D is Debt, Leverage is defined as:
Select one:
a. E-D
b. E/D
c. D/E
d. D - E
9) Regression beta is:
Select one:
a. Depends on alpha
b. un-levered beta
c. Beta * (1 -D/E)
d. levered beta
10) If an asset Jensen's alpha is positive, it's return is:
Select one:
a. Above CAPM
b. Below CAPM
c. Same as CAPM
d. Not enough information
11) Which one of these violates Miller-Modigliani conditions for their irrelevance theorem:
Select one:
a. Asymmetry of information in market
b. Taxes
c. risk of bankruptcy
d. All of the above
12) Dividend yield is defined as
Select one:
a. Dividend / Stock price
b. Dividend / EBIT
c. EBIT / net income
d. none of the above
13) Which one is correct?
Select one:
a. Dividends are sticky
b. Dividends are taxable
c. All of the above
d. Dividends are paid from net income
14) Leverage increases the cost of equity
Select one:
a. always
b. only if there is risk of bankruptcy
c. if beta is larger than 1
d. never
15) Manager's job is to .....
Select one:
a. Not worry about capital structure as M&M theory says
b. make debt as small as needed
c. find an optimum capital structure
d. Make debt 50% of equity
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