1. Tax deductibility is a characteristic of: (Points: 5)
   1. Debt Equity

1. EPS dilution is a characteristic of: (Points: 5)
   1. Debt Equity

1. Debt cost is: (Points: 5)
   1. Low
   2. High

1. Increased risk is a characteristic of: (Points: 5)

1. 1. Debt Equity

1. The return on equity is: (Points: 5)
   1. Fixed
   2. Variable

1. Which is the correct descending order of priority of rights in liquidation? (Points: 10)
   1. preferred stockholders, senior creditors, common stockholders, government for past due taxes, subordinated creditors
   2. subordinated creditors, preferred stockholders, common stockholders, government for past due taxes, senior creditors
   3. senior creditors, subordinated creditors, government for past due taxes, preferred stockholders, common stockholders
   4. government for past due taxes, senior creditors, subordinated creditors, preferred stockholders, common stockholders

1. Discuss market efficiency and the difference between weak form efficient, semi-strong form efficient and strong form. (Points: 10)

1. Most markets are considered semi-strong form efficient, which means you generally cannot make money trading on _______________ information; trading on insider information, however, can be lucrative. (Points: 5)

1. Define the "interest tax shield" and explain how it works with debt financing. (Points: 10)

1. What is the ratio used to calculate the "interest tax shield?" (Points: 5)

1. When will an "interest tax shield" not help a company? (Points: 5)

1. Discuss how Scotts Miracle Grow recapitalization turned out in the down economy of 08-09. Specifically: The executives for Scott's, in the authors estimate, doubled their debt, to buy back 17 million shares of common stock, in order to ratchet up the EPS, which is a key determinant of bonuses. Since this is a closed book exam, tell me what you remember in general terms. (Points: 10)

1. From the Scott's executives standpoint, how did THEY do? (Points: 5)

1. From the Scott's stockholders' standpoint, how did THEY do? (Points: 5)

1. Beta measures an asset's relative systematic risk. (Points: 5)

1. 1. True
   2. False

Give me at least two of the four pitfalls to avoid in discounted cash flow analysis. (Points: 10)

FI415 Final Exam Instructor: Dee Malone 1. Tax deductibility is a characteristic of: (Points: 5) a. Debt b. Equity 2. EPS dilution is a characteristic of: (Points: 5) a. Debt b. Equity 3. Debt cost is: (Points: 5) a. Low b. High 4. Increased risk is a characteristic of: (Points: 5) a. Debt b. Equity 5. The return on equity is: (Points: 5) a. Fixed b. Variable 6. Discuss financial ratios and their usefulness, and then talk about what to do if they don't necessarily follow the company or industry norm. (Points: 10) 7. Give an example of a negative ratio, an undefined ratio or a zero ratio and what could make that occur. (Points: 10) Page 1 of 3 FI415 Final Exam Instructor: Dee Malone 8. Which is the correct descending order of priority of rights in liquidation? (Points: 10) a. preferred stockholders, senior creditors, common stockholders, government for past due taxes, subordinated creditors b. subordinated creditors, preferred stockholders, common stockholders, government for past due taxes, senior creditors c. senior creditors, subordinated creditors, government for past due taxes, preferred stockholders, common stockholders d. government for past due taxes, senior creditors, subordinated creditors, preferred stockholders, common stockholders 9. Discuss market efficiency and the difference between weak form efficient, semi-strong form efficient and strong form. (Points: 10) 10. Most markets are considered semi-strong form efficient, which means you generally cannot make money trading on _______________ information; trading on insider information, however, can be lucrative. (Points: 5) 11. Define the "interest tax shield" and explain how it works with debt financing. (Points: 10) 12. What is the ratio used to calculate the "interest tax shield?" (Points: 5) 13. When will an "interest tax shield" not help a company? (Points: 5) 14. Discuss how Scott's Miracle Grow recapitalization turned out in the down economy of '08-09. Specifically: The executives for Scott's, in the author's estimate, doubled their debt, to buy back 17 million shares of common stock, in order to ratchet up the EPS, which is a key determinant of bonuses. Since this is a closed book exam, tell me what you remember in general terms. (Points: 10) 15. From the Scott's executives' standpoint, how did THEY do? (Points: 5) Page 2 of 3 FI415 Final Exam Instructor: Dee Malone 16. From the Scott's stockholders' standpoint, how did THEY do? (Points: 5) 17. Beta measures an asset's relative systematic risk. (Points: 5) a. True b. False 18. Give me at least two of the four pitfalls to avoid in discounted cash flow analysis. (Points: 10) Page 3 of 3