Question 19. 19. One of the reasons why cash flow analysis is popular is because ________. (Points : 5)

cash flows are more subjective than net income cash flows are hard to understand it is easy to manipulate, or spin the cash flows it is difficult to manipulate, or spin the cash flows none of these

Question 20. 20. A company owning gold mines will probably have a _____ inflation beta because an ___ increase in inflation is usually associated with an increase in gold prices. (Points : 5)

negative; anticipated positive; anticipated negative; unanticipated positive; unanticipated None of these

Question 21. 21. The formula for calculating beta is given by the dividing the ___________ of the stock with the market portfolio by the ___________ of the market portfolio. (Points : 5)

variance; covariance covariance; variance standard deviation; variance expected return; variance expected return; covariance

Question 22. 22. If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, I, would result in a change in any security return of ___ I. (Points : 5)

9.2 3.2 3.2 3.0 6.2

Question 23. 23. The characteristic line is graphically depicted as _________. (Points : 5)

the plot of the relationship between beta and expected return the plot of the returns of the security against the beta the plot of the security returns against the market index returns the plot of the beta against the market index returns none of these

Question 24. 24. The internal rate of return tends to be ________. (Points : 5)

easier for managers to comprehend than the net present value extremely accurate even when cash flow estimates are faulty ignored by most financial analysts used primarily to differentiate between mutually exclusive projects utilized in project analysis only when multiple net present values apply

Question 25. 25. Erosion can be explained as the ________. (Points : 5)

additional income generated from the sales of a newly added product loss of current sales due to a new project being implemented loss of revenue due to employee theft loss of revenue due to customer theft loss of cash due to the expenses required to fix a parking lot after a heavy rain storm

Question 26. 26. A bond with semi-annual interest payments, all else equal, would be priced _________ than one with annual interest payments. (Points : 5)

higher lower the same it is impossible to tell either higher or the same

Question 27. 27. The net present value of a growth opportunity, NPVGO, can be defined as _________. (Points : 5)

the initial investment necessary for a new project the net present value per share of an investment in a new project a continual reinvestment of earnings when r < g a single period investment when r > g none of these

Question 28. 28. Which of the following are all components of the statement of cash flows? (Points : 5)

Cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities Cash flow from operating activities, cash flow from investing activities, and cash flow from divesting activities Cash flow from internal activities, cash flow from external activities, and cash flow from financing activities Cash flow from brokering activities, cash flow from profitable activities, and cash flow from non-profitable activities None of these

Question 29. 29. Over the period of 1926 to 2011, small company stocks had an average return of ____%. (Points : 5)

8.8 10.2 12.4 14.6 16.5

Question 30. 30. You are comparing two annuities which offer monthly payments for ten years. Both annuities are identical with the exception of the payment dates. Annuity A pays on the first of each month while annuity B pays on the last day of each month. Which one of the following statements is correct concerning these two annuities? (Points : 5)

Both annuities are of equal value today. Annuity B is an annuity due. Annuity A has a higher future value than annuity B. Annuity B has a higher present value than annuity A. Both annuities have the same future value as of ten years from today.

Question 31. 31. Consider a bond which pays 8% semiannually and has 8 years to maturity. The market requires an interest rate of 10% on bonds of this risk. What is this bond's price? (Points : 5)

$530.58 $891.62 $893.30 $3129.17 None of these

Question 32. 32. Assume that the single factor APT model applies and a portfolio exists such that 2/3 of the funds are invested in Security Q and the rest in the risk-free asset. Security Q has a beta of 1.5. The portfolio has a beta of ________. (Points : 5)

0.00 0.50 0.75 1.00 1.50

Question 33. 33. It will cost $3,000 to acquire a small ice cream cart. Cart sales are expected to be $1,400 a year for three years. After the three years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart? (Points : 5)

83 years 1.14 years 1.83 years 2.14 years 2.83 years