The aspect of risk that addresses how diverse the possible outcomes of an investment are is called:

A. correlation.

B. insurance policy and premium.

C. coupon and par values.

D. Dispersion.

The beta of a well-diversified portfolio of stocks is:

A .001

B. 15%

C. 1.0

Which of the following is a measure of a stock's price fluctuations with the price fluctuations of a well-diversified portfolio of stocks?

a. beta

B. risk-free rate

C. discount rate

D internal rate of return

Part of what makes up the discount rate is the risk-free rate of return.

True

False

An example of unsystematic risk is a worldwide recession.

True

False

Even if an investment has no risk, an investor would still expect at least the risk-free return.

Group of answer choices

True

False

When valuing an investment, investors prefer to use market value instead of book value.

True

False

Company A has the following Shareholders' Equity section:

Common stock	$ 500,000
Additional Paid-in Capital	1,500,000
Retained Earnings	700,000
Total Shareholders Equity	$ 2,700,000

If Company A's market stock price is $72 per share and it has 95,000 shares outstanding, which is higher?

A. Company As market value

B. Company A's book value

For an investment to be acceptable, the Net Present Value should be greater than 0 and the Benefit Cost Ratio should be greater than 1.

True

False

An investment's Internal Rate of Return should be higher than which of the following to be acceptable?

A. Unemployment Rate

B. Inflation Rate

C. Discount Rate

D. Coupon Rate

The Weighted Average Cost of Capital (WACC) is the discount rate used to evaluate a corporation's average-risk projects.

True

False

If a corporation consistently earns less of a return on its average-risk projects than its WACC, its stock price will:

A. stay the same.

B. decrease.

C. Increase.

If a corporation's WACC is 12% and it keeps getting a return on its average-risk investments of 10%, the corporation's stock price will:

A. decline.

B. stay the same.

C. Increase.

Below is a recent income statement for Spring Valley Conservation Technologies, Inc.:

Spring Valley Conservation Technologies, Inc.

Income Statement ($000s)

For the Year Ended December 31, 2021

Consulting Fees	$ 920
Operating Expenses	(549)
Depreciation Expense	( 30)
Earnings Before Interest and Taxes	341
Interest Expense	( 56)
Earnings Before Tax	285
Tax @ 20%	(57)
Net Income	$ 228

Calculate Spring Valley Conservation Technologies' free cash flow in this year assuming it spent $64 on capital equipment and increased working capital by $72. (All figures in $000s.)

Formula:

Free Cash Flow = EBIT(1-Tax Rate) + Depreciation - Fixed Asset Investment - Investment in Working Capital

A. $74,500.

B. $263,000.

C.$195,300.

D. 166,800.

When evaluating a project to determine its Net Present Value, a corporation must ___________ the expected Free Cash Flow of all years during the term of the project to the present values.

A. discount

B. double

C. increase

D. Disregard

Which of the following would NOT be a corporate restructure?

A. A corporation being bought by an international conglomerate

B. 6% price increase on top-selling product to keep up with inflation

C. Downsizing the number of staff by 30% as a corporation discontinues one of its major divisions

D. Two competitor companies in the same industry merging

When two companies combine to form a new company, it is called a(n)

A.liquidation.

B.treasury stock.

C.merger.

D. initial public offering.

An example of corporate restructure is which of the following:

A. acquisition

B. merger

C. All of these answers are examples of corporate restructure.

D. change in asset mix

E. change in ownership and management

When calculating terminal value:

If a company is mature and its rate of growth has peaked, the perpetual growth rate in the terminal period usually becomes higher than the rate of growth forecasted for the T period (or near future).

True

False

When purchasing a company, the acquiring company will consider which has the higher value: the target company's value as a going concern or its value in:

A. perpetuity.

B.liquidation.

C.internal rate of return.

D. terminal value.