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on 1

8 out of 8 points

Which
of the following statements is CORRECT?

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Question 2

8 out of 8 points

Which of the following statements is
most CORRECT?

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Question 3

8 out of 8 points

Stock
X has a required return of 10%, while Stock Y has a required return of 12%. Which of the following statements is
CORRECT?

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Question 4

8 out of 8 points

Which
of the following statements is CORRECT?

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Question 5

8 out of 8 points

Deeble Construction Co.’s stock is trading at $30
a share. Call options on

the company’s stock are also
available, some with a strike price of $25 and

some with a strike price of $35. Both options expire in three months. Which

of the following best describes the
value of these options?

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Question 6

8 out of 8 points

You
are on the staff of Camden Inc. The CFO believes project acceptance
should be based on the NPV, but Steve Camden, the president, insists that no
project can be accepted unless its IRR exceeds the project’s risk-adjusted
WACC. Now you must make a recommendation on a project
that has a cost of $15,000 and two cash flows: $110,000 at the end of Year 1
and -$100,000 at the end of Year 2. The president and the CFO both agree
that the appropriate WACC for this project is 10%.At 10%, the NPV is $2,355.37, but you
find two IRRs, one at 6.33% and one at 527%, and a MIRR of 11.32%. Which of the following statements
best describes your optimal recommendation, i.e., the analysis and
recommendation that is best for the company and least likely to get you in
trouble with either the CFO or the president?

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Question 7

8 out of 8 points

1. Based on the corporate valuation
model, Hunsader’s value of operations is $300 million. The balance sheet shows $20 million
of short-term investments that are unrelated to operations, $50 million of
accounts payable, $90 million of notes payable, $30 million of long-term
debt, $40 million of preferred stock, and $100 million of common equity. The company has 10 million shares of
stock outstanding. What is the best estimate of the stock’s price
per share?

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Question 8

8 out of 8 points

When
working with the CAPM, which of the following factors can be determined with
the most precision?

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Question 9

8 out of 8 points

Volga
Publishing is considering a proposed increase in its debt ratio, which would
also increase the company’s interest expense. The plan would involve issuing new
bonds and using the proceeds to buy back shares of its common stock. The company’s CFO thinks the plan
will not change total assets or operating income, but that it will increase
earnings per share (EPS). Assuming the CFO’s estimates are
correct, which of the following statements is CORRECT?

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Question 10

8 out of 8 points

If
two firms have the same current dividend and the same expected dividend
growth rate, their stocks must sell at the same current price or else the
market will not be in equilibrium.

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Question 11

8 out of 8 points

A
highly risk-averse investor is considering adding one additional stock to a
3-stock portfolio, to form a 4-stock portfolio. The three stocks currently held all
have b = 1.0 and a perfect positive correlation with the market. Potential new Stocks A and B both
have expected returns of 15%, and both are equally correlated with the
market, with r = 0.75. However, Stock A’s standard deviation of returns
is 12% versus 8% for Stock B. Which stock should this investor add
to his or her portfolio, or does the choice matter?

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Question 12

8 out of 8 points

Which
of the following statements is CORRECT?

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Question 13

8 out of 8 points

You
are negotiating to make a 7-year loan of $25,000 to Breck Inc. To repay you, Breck will pay $2,500
at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of
Year 3, plus a fixed but currently unspecified cash flow, X, at the end of
Years 4 through 7. Breck is essentially riskless, so you are
confident the payments will be made, and you regard 8% as an appropriate rate
of return on low risk 7-year loans. What cash flow must the investment
provide at the end of each of the final 4 years, that is, what is X?

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Question 14

8 out of 8 points

Below
is the common equity section (in millions) of Teweles Technology’s last two
year-end balance sheets:

2007 2006

CommonStock $2000 $1000

RetainedEarnings 2000 2340

Total
Common
Equity $4000 $3340

Teweles
has never paid a dividend to its common stockholders. Which of the following statements is
CORRECT?

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Question 15

8 out of 8 points

Which
of the following statements isNOT CORRECT?

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Question 16

8 out of 8 points

In
1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the same
amount of yen today but the current exchange rate is 144 yen per dollar, what
would the car be selling for today in U.S. dollars?

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Question 17

8 out of 8 points

Edmondson
Electric Systems is considering a project that has the following cash flow
and WACC data. What is the project’s NPV?Note that if a project’s projected
NPV is negative, it should be rejected.

WACC: 10.00%

Year:
0
1
2
3

Cash
flows: -$1000 $500 $500 $500

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Question 18

8 out of 8 points

Suppose
firms follow similar financing policies, face similar risks, have equal
access to capital, and operate in competitive product and capital markets. Under these conditions, then firms
that have high profit margins will tend to have high asset turnover ratios,
and firms with low profit margins will tend to have low turnover ratios.

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Question 19

8 out of 8 points

Companies
E and P each reported the same earnings per share (EPS), but Company E’s
stock trades at a higher price. Which of the following statements is
CORRECT?

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Question 20

8 out of 8 points

Which
of the following statements is CORRECT?

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Question 21

8 out of 8 points

Other
things held constant, which of the following will cause an increase in
net working capital?

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Question 22

8 out of 8 points

Which
of the following isNOT a capital component when
calculating the weighted average cost of capital (WACC)?

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Question 23

8 out of 8 points

Which
of the following statements is CORRECT?

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Question 24

8 out of 8 points

Which of the following doesNOT always increase a company’s
market value?

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Question 25

8 out of 8 points

Firm
A has a higher degree of business risk than Firm B. Firm A can offset this by using less
financial leverage. Therefore, the variability of both firms’
expected EBITs could actually be identical.