QUESTION 1

1. Which one of the following terms is defined as the management of a firm's long-term investments?

   		working capital management
   		agency cost analysis
   		capital budgeting
   		capital structure

0.5 points

QUESTION 2

1. Which one of the following is defined as a firm's short-term assets and its short-term liabilities?

   		working capital
   		debt
   		investment capital
   		net capital

0.5 points

QUESTION 3

1. A business formed by two or more individuals who each have unlimited liability for all of the firm's business debts is called a:

   		corporation.
   		sole proprietorship.
   		general partnership.
   		limited partnership.

0.5 points

QUESTION 4

1. "A business created as a distinct legal entity and treated as a legal ""person"" is called a: "

   		corporation.
   		sole proprietorship.
   		general partnership.
   		limited partnership.

0.5 points

QUESTION 5

1. A stakeholder is:

   		any person who has voting rights based on stock ownership of a corporation.
   		a person who initially founded a firm and currently has management control over that firm.
   		a creditor to whom a firm currently owes money.
   		any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.

0.5 points

QUESTION 6

1. Which one of the following is a capital structure decision?

   		determining which one of two projects to accept
   		determining how to allocate investment funds to multiple projects
   		determining the amount of funds needed to finance customer purchases of a new product
   		determining how much debt should be assumed to fund a project

0.5 points

QUESTION 7

1. Which one of the following business types is best suited to raising large amounts of capital?

   		sole proprietorship
   		limited liability company
   		corporation
   		general partnership

0.5 points

QUESTION 8

1. Which one of the following best states the primary goal of financial management?

   		maximize current dividends per share
   		maximize the current value per share
   		increase cash flow and avoid financial distress
   		minimize operational costs while maximizing firm efficiency

0.5 points

QUESTION 9

1. Shareholder A sold 500 shares of ABC stock on the New York Stock Exchange. This transaction:

   		took place in the primary market.
   		occurred in a dealer market.
   		was facilitated in the secondary market.
   		involved a proxy.

0.5 points

QUESTION 10

1. Financial market is

   		where commodities exchange hands
   		where securities are issued and traded
   		where loan is taken
   		where loan is repaid

0.5 points

QUESTION 11

1. KIBOR stands for

   		Karachi international board of record
   		Korangi industrial board of record
   		Karachi inter bank offered rate
   		Karachi international bank offered rate

0.5 points

QUESTION 12

1. "An individual has $35,000 invested in a stock with a beta of 0.8 and another $40,000 invested in a stock with a beta of 1.4. If these are the only two investments in her portfolio, what is her portfolio s beta?"

   		1
   		1.12
   		0.85
   		1.5

0.5 points

QUESTION 13

1. "Assume that the risk-free rate is 5% and that the market risk premium is 6%. What is the required return on the market, on a stock with a beta of 1.0, and on a stock with a beta of 1.2?"

   		11% and 12.2%
   		10.5% and 11.7%
   		11.25% and 10.7%
   		10.7% and 11.8%

0.5 points

QUESTION 14

1. "The market returns are 15%, 9% and 18% and Stock J returns are 20%, 5% and 12% . They have the probability distributions 0.3, 0.4 and 0.3 respectively and expected returns are: Market: 13.5% and Stock J: 11.6%. Calculate the standard deviations for the market and Stock J."

   		Market: 3.85% and Stock J: 5.5%
   		Market: 3.2% and Stock J: 6.22%
   		Market: 3.85% and Stock J: 6.22%
   		Market: 4.5% and Stock J: 3.2%

0.5 points

QUESTION 15

1. "Suppose rRF = 5%, rM = 10%, and rA = 12%. If Stock A s beta were 2.0, then what would be A s new required rate of return?"

   		12%
   		15%
   		13.50%
   		16.50%

0.5 points

QUESTION 16

1. "An investor has a three-stock portfolio with $25,000 invested in Dell, $50,000 invested in Ford, and $25,000 invested in Wal-Mart. Dell s beta is estimated to be 1.20, Ford s beta is estimated to be 0.80, and Wal-Mart s beta is estimated to be 1.0. What is the estimated beta of the investor s portfolio?"

   		0.8
   		0.95
   		1.1
   		1.3

0.5 points

QUESTION 17

1. "A company has outstanding long-term bonds with a face value of $1,000, a 10% coupon rate, 25 years remaining until maturity, and a current market value of $1,214.82. If it pays interest semiannually, and the company s tax rate is 40%, what is the after-tax cost of debt?"

   		4.80%
   		4.50%
   		5.20%
   		3.50%

0.5 points

QUESTION 18

1. "A company s estimated growth rate in dividends is 6%, its current stock price is $40, and its expected annual dividend is $2. Using the DCF approach, what is the firm s rs?"

   		8%
   		9%
   		10%
   		11%

0.5 points

QUESTION 19

1. "Should the weights used to calculate the WACC be based on book values, market values, or something else?"

   		Market Value
   		Book Value
   		both can be used
   		None of the above

0.5 points

QUESTION 20

1. "Shi Importer s balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi s tax rate is 40%, rd = 6%, rps = 5.8%, and rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC?"

   		9.80%
   		9.17%
   		8.90%
   		8.40%