Which one of these can be used as an argument that independent deviations from rationality are not generally random?

Arbitrage

Conservatism

Insider trading

Continuation

Stockholder disinterest

2. Which one of these terms is used to describe a market where investors draw conclusions from insufficient data?

Representativeness

Arbitrage

Synergy

Independent deviations from rationality

Conservatism

3. Durbin, Inc., is an unlevered firm with a total market value of $380,000 with 20,000 shares of stock outstanding. The firm has expected EBIT of $23,000 if the economy is normal and $30,000 if the economy booms. The firm is considering a bond issue of $85,500 with an attached interest rate of 5.5 percent. The bond proceeds will be used to repurchase shares. The tax rate is 34 percent. What will be the earnings per share after the repurchase if the economy booms?

$1.28

$1.63

$1.37

$1.08

$1.45

4. Which one of these statements is correct for a levered firm?

The optimal level of debt for a firm results in the value of that firm being maximized.

The value of a firm is maximized when its cost of capital is also maximized.

To obtain its maximum value, a firm should select an all-equity capital structure.

An increase in financial distress costs increases the value of a firm.

An increase in tax rates will decrease the value of the firm.

5. The Robert's Co. just paid an annual dividend of $3.22 a share. The firm has a target payout ratio of .75 and a speed of adjustment value of .8. What is the expected value of next year's annual dividend if the firm expects its earnings per share to be $6.33?

$3.98

$4.75

$5.80

$3.58

$4.44

6. Bruno's has 17,000 shares of stock outstanding with a par value of $1 per share and a market value of $38.29 per share. The balance sheet shows $17,000 in the common stock account, $528,360 in the capital in excess of par value account, and $432,500 in the retained earnings account. The firm just announced a 50 percent (large) stock dividend. What will be the balance in the capital in excess of par value after the dividend?

$202,895

$792,540

$528,360

$211,395

$845,325

7. The expected inflation rate in Finland is 1.35 percent while it is 3.45 percent in the U.S. A risk-free asset in the U.S. is yielding 4.95 percent. What real rate of return should you expect on a risk-free Finnish security?

6.20%

2.85%

1.50%

.15%

2.15%