FIN 701 Exam Bundle Graded A+

Allison just received her semiannual payment of $35 on a bond she owns. Which term refers to this payment? a. coupon b. face value c. discount d. call premium e. yield - Answer-coupon Bert owns a bond that will pay him $45 each year in interest plus a $1,000 principal payment at maturity. Wh...

Place 1500 into an account earning 6%. How much will be in the account after 7 years? - Answer-Example 1.1 2255.445 I have created a legal contract that promises to pay the holder 10,000 in 9 years. What price would you be willing to pay for the contract now to provide a return of 7%? - Answer...

A firm should select the capital structure that? - Answer-maximizes the value of the firm The Value of a firm is maximized when the: - Answer-Weighted average cost of capital is minimized. The Optimal capital structure has been achieved when the - Answer-debt-equity ratio results in the lowest...

1. A company's current cost of capital is based on: A. Only the return required by the company's current shareholders. B. The current market rate of return on equity shares C. The weighted costs of all future funding sources D. Both the returns currently required by its debt holders and stockh...

Cash Dividend - Answer-A cash payment made by a firm to the owners in the normal course of business, usually paid four times a year. Extra Cash Dividend - Answer-Paid over and above the regular dividend, and it may or may not be repeated Special Dividend - Answer-A one-time dividend paid over ...

Business Risk - Answer-The equity risk that comes from the nature of the firm' operating activities and directly related to the firm's operations. True - Answer-T/F: As the firm takes on more and more debt, the return on equity (ROE) increases. Financial Risk - Answer-The extra risk to share...

Time Value of Money - Answer-Money's potential to grow in value over time. The relationship between time, money, a rate of return, and earnings growth. The Money Rules - Answer-1. Value depends on the AMOUNT (receive more/pay less) 2. Value depends on the TIMING (receive sooner/pay later) 3...

Timelines are an excellent - Answer-way to visualize the cash flows in a particular problem. The Money Rules - Answer-•Value depends on the AMOUNT -Choose to receive MORE, pay LESS •Value depends on the TIMING -Choose to receive SOONER, pay LATER •The value of a business deal involv...

1. What types of companies are more likely to have high leverage? - Answer-a. Utility companies b. Technology companies c. Retail grocery chains d. Airlines A 2. If the industry median ROE is 12.3. and the firm's ROE is 11.9, then the firm's riskiness is: - Answer-a. not possi...

A company's current cost of capital is based on A) Only the return required by the company's current shareholders B) Current market rate of return on equity shares C) weight costs of all future funding sources D) both returns currently required by its debtholders and stockholders - Answer-D) b...

A company's current cost of capital is based on: - Answer-both the returns currently required by its debt holders and stockholders All else constant, which one of the following will increase a company's cost of equity if the company computes that cost using the security market line approach? As...

The sources and uses of cash over a stated period of time are reflected on the: - Answer-statement of cash flows A common-size income statement is an accounting that expresses all of a firm's expenses as a percentage of: - Answer-sales On a common-size balance sheet all accounts for the curre...

An example of a capital budgeting decision is deciding: - Answer-whether or not to purchase a new machine for the production line Capital structure decision includes determining: - Answer-how much debt should be assumed to fund a project The decision to issue additional shares of stock is an e...

Value of a business deal involves these two things: - Answer-1. The AMOUNT (receive more pay less) 2. The TIMING (receive sooner pay later) The value of a business deal involves a tradeoff between amount of payment and timing The Simple Rule of 72 - Answer-is an approximation of how long it ...

capital - Answer-represents the funds used to finance a firm's assets and operations cost of capital - Answer-average cost of financing the company's assets hurdle rate - Answer-minimum rate of return which a firm must earn on its investments to provide a return to its investors based on the...

Capital - Answer-funds used to finance a firm's assets and operations cost of capital - Answer-average cost of raising new capital for the firm minimum (or hurdle rate) rate of return - Answer-firm must earn on its investments to provide a return to the providers of the funds based on the ris...

The negative signs that your calculator (or Excel) would indicate are? - Answer-The representation of investment vs. receipt of funds. For any positive interest rate, the future value is _______________ than the present value - Answer-Greater A 0% interest rate means ? - Answer-The original in...

Capital Budgeting - Answer-What long term investments should the firm take on? Chief Financial Officer (CFO) - Answer-The top financial manager within a firm Controller - Answer-oversees taxes, cost accounting, financial accounting and Information systems Capital structure - Answer-Where wi...

What is Finance? - Answer-Covers anything to do with the use and management of money. Why do we study finance? (4 reasons) - Answer-1. All businesses functions deal with finance: 2. Managers need to understand the financial health of their firms 3. Departmental budget management 4. You need t...

The sources and uses of cash over a stated period of time are reflected on the: - Answer-Statement of cash flows A common-size income statement is an accounting statement that expresses all of a firms expenses as a percentage of: - Answer-Sales On a common-size balance sheet all accounts for t...

A firm should select the capital structure that: - Answer-maximizes the value of the firm The value of a firm is maximized when the: - Answer-weighted average cost of capital is minimized The optional capital structure has been achieved when the: - Answer-debt-equity ratio results in the lowes...

Which of the following is a current asset? - Answer-accounts receivable cash and other assets expected to be exchanged for cash or consumed within a year - Answer-Current assets Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting val...

Standardized Financial Statements - Answer-Common-Size Balance Sheets All accounts = percent of total assets (%TA) ▪ Common-Size Income Statements All line items = percent of sales or revenue ▪ Are useful for: Comparing financial information year-to-year. Comparing companies of different...

A company's current cost of capital is based on: - Answer-both the returns currently required by its debtholders and stockholders All else constant, which one of the following will increase a company's cost of equity if the company computes that cost using the security market line approach? Ass...

Capital - Answer-Represents the funds used to finance a firm's assets and operations Cost of capital: - Answer-The average cost of raising new capital for the firm. This is the minimum (or hurdle rate) rate of return which a firm must earn on its investments to provide a return to the provid...

Net Present Value (NPV) - Answer-the difference between the present value of a project's future cash flows and its cost. Estimating cost is usually straight forward; however, estimating future cash flows can be tricky. discounted cash flow (DCF) valuation - Answer-finding the market value of ass...

1) An example of a capital budgeting decision is deciding: A) how many shares of stock to issue. B) whether or not to purchase a new machine for the production line. C) how to refinance a debt issue that is maturing. D) how much inventory to keep on hand. E) how much money should be kept in the chec...

E) The project's cash inflows equal its cash outflows in current dollar terms - Answer-I)A project has a net present value of zero. Which one of the following best describes this project? A) The project has a zero percent rate of return. B) The project requires no initial cash investment. C) The pr...

The common stock of Pierson Enterprises has historically had a high dividend yield and is expected to continue to do so. As a result, the majority of its shareholders are individuals and entities that are seeking a regular source of cash income. Most of these shareholders pay either no taxes or a re...

manager - Answer-someone that directs resources to achieve a goal directs the efforts of others, purchases inputs used in the production of the firms output, directs other decisions like the product price and quality and construct incentives to induce maximal effort from employees - Answer-what d...

An example of a capital budgeting decision is deciding: - Answer-whether or not to purchase a new machine for the production line. Capital structure decisions include determining - Answer-how much debt should be assumed to fund a project. The decision to issue additional shares of stock is an ...

Why do we study finance? - Answer-- Managers need to understand the financial health of their firms - Departmental budget management - Need to be able to make the financial argument for the funding of your projects What are the 3 key financial decisions for a firm? - Answer-capital budgeting, c...

What are the standard ways of measuring risk? - Answer-1. Standard deviation 2. Beta (from CAPM) What is standard deviation? - Answer-A measure of how the individual returns on the stock deviate from the expected value or mean. What is beta (in relation to CAPM)? - Answer-Measure of how much...

4 Basic Areas of Finance - Answer-corporate finance investments financial institutions international finance Basic Area of Finance: Investments - Answer-The investments area deals with financial assets such as stocks and bonds. The main question in this area is how to value financial as...

Any dealing that involves money is termed _____. - Answer-transaction Which is an itemized expansion of the accounting equation, listing assets, liabilities and the resulting owner's equity? - Answer-balance sheet When reconciling, what do you do with the interest earned? - Answer-Add the amo...