Advanced Corporate Finance
- 1.Which of the following statements is false?
- A.
Fundamentally, interest rates are determined by the Federal Reserve.
- B.
The interest rates that are quoted by banks and other financial institutions are nominal interest rates.
- C.
The Federal Reserve determines very short-term interest rates through its influence on the federal funds rate.
- D.
The interest rates that banks offer on investment or charge on loans depends on the horizon of the investment or loan.
- 2.Which of the following statements is false?
- A.
The relationship between the investment term and the interest rate is called the term structure of the interest rate.
- B.
Real interest rates indicate the rate at which your money will grow if invested for a certain period.
- C.
The yiesd curve is a potential leading indicator of future economic grow.
- D.
The shape of the yield curve will be strongly influenced by interest rate expectations.
- 3.Which of the following statements is false?
- A.
As firms mature, their earnings exeed their investment needs they begin to pay dividends.
- B.
Total return = earnings * by the divident payout rate.
- C.
Cutting the firm`s dividend to increase investment will raise the stock price if, and only if, the new investment have a positive NPV.
- D.
We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth.
- 4.The date on which the board authorizes the dividend is the:
- A.
Declaration date.
- B.
Distribution date.
- C.
Record date.
- D.
Ex-dividend date.
- 5.The firm will pay the divident to all shareholders who are registered owners on a specific dare, set by the board, called the:
- A.
Record date.
- B.
Declaration date.
- C.
Distribution date.
- D.
Ex-dividend date.
- 6.Anyone who purchases the stock on or after the______ date will not receive the devidend.
- A.
Distribution.
- B.
Ex-dividend.
- C.
Record.
- D.
Declaration.
- 7.Which of the following statements is false?
- A.
Most companies that pay dividends pay them semiannually.
- B.
From an accounting perspective, dividends generally reduce the firm`s current (or accumulated) retained earnings.
- C.
The way a firm chooses between paying dividends and retaining earnings is referred to as its payout policy.
- D.
Occasionally, a firm may pay a one-time, special dividend that is usually much large than a regular dividend.
- 8.A firm can repurchase shares through a(n)______ in which it offers to buy shares at a prespecified price during a short time period, generally within 20 days.
- A.
Tender offer.
- B.
Open market share repurchases.
- C.
Target repurchase.
- D.
Dutch auction share repurchase.
- 9.One of methods to repurchase shares is the__________, in which the firm lists different prices at which it is prepared to buy shares, and shareholders in turn indicate how many shares they are willing to sell at each price.
- A.
Dutch auction share repurchase.
- B.
Tender offer.
- C.
Targeted repurchase.
- D.
Open market share repurchases.
- 10.A(n)_________is the most common way that firms repurchase shares.
- A.
Target repurchase
- B.
Dutch auction share repurchse.
- C.
Tender offer.
- D.
Open market share repurchases.
- 11.Which of the following statements is false?
- A.
Equity holders expect to receive dividends and the firm is legally obligated to pay them.
- B.
A firm that fails to make the required interest or principal payment on the debt is in default.
- C.
In the extreme case, the debt holders take legal ownership of firm`s assets through a process called bankruptcy.
- D.
After a firm defaults, debt holders are given certain rights to the assets of the firm.
- 12.Which of the following statements is false?
- A.
An important consequence of leverage is the risk of bankruptcy.
- B.
Whether default occurs depends on the cash flow, not on the relative value of the firm`s assets and liabilities.
- C.
Economic distress is a significant decline in the value of a firm`s assets, whether or not it experiences financial distress due to leverage.
- D.
Modigliani and Miller`s results continue to hold in a perfect market even when debt is risky and the firm may default.
- 13.Which of the following statements regarding perpetuities is false?
- A.
To find the value of a perpetuity one cash flow at a time would take forever.
- B.
A perpetuity is a stream of equal cash flows that occur at regular intervals and last forever.
- C.
PV of a perpetuity = r/C
- D.
One example of a perpetuity is the British goverment bond called a consol.
- 14.Which of the following statements is regarding annuities is false?
- A.
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- B.
The difference between an annuity and perpetuity is that a perpetuity ends after some fixed number of payments.
- C.
An annuity is a stream of N equal cash flows paid at regular intervals.
- D.
Most car loans, mortgages, and some bonds are annuities.
- 15.Which of the followig statements is false?
- A.
The interest rates that banks offer on investments or charge on loans depends on the horizon of the investment or loan.
- B.
The Federal Reserve determines very short-term interest rates through its influence on the federal funds rate.
- C.
Fundamentally, interest rates are determined by the Federal Reserve.
- 16.Which of the following statements is false?
- A.
The relationship between the investment term and the interest rate is called the term structure of interest rates.
- B.
Real interest rates indicate the rate at which your money will grow if invested for a certain period.
- C.
The yield curve is a potential leading indicator of future economic grow.
- 17.P/E ratio?
- A.
P/E ratio = Share Price/EPS
- B.
P/E ratio = Profit/Number of Shares Outstanding
- 18.Share Price ?
- A.
Equty = Share Price * Shares Outstanding
- B.
SP = Equty / Shares Outstanding
- 19.A voluntary reorganization of debts whereby a firm`s debt obligations are still expected to be paid in full but at a later than originally scheduled date, is called?
- A.
A composition.
- B.
An extention.
- C.
Creditor control
- D.
None of the above
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