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Corp Finance Final Exam Questions And 100% Correct Answers
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Corp Finance Final Exam Questions And 100%Correct Answers
Which of the following statements is most correct?
Select one:
a. Management's primary objective is to maximize the current stock price.
b. Management's primary objective is to minimize weighted average cost of capital.
c. Management's primary objective is to maximize the intrinsic value of the company and
its stock
d. All of the above
e. None of the above - Answer C
All of the following can cause investors' required rate of return to change except:
Select one:
a. Risk-free rate can change
b. Investor's aversion to risk can change
c. A stock's beta can change
d. All of the above can cause it to change
e. None can cause it to change - Answer D
A firm is considering actions that would raise its debt ratio. It is anticipated that these
actions would have no effects on sales, operating income, or on the firm's total assets. If
the firm does raise its debt ratio, which of the following must occur?
Choose one:
a. Basic Earnings Power would fall
b. Times Interest Earned would rise
,c. Return on Assets would rise
d. Profit Margin would fall
e. Total Asset Turnover will increase - Choice D
A share is not likely to pay a dividend for the next four years. The company believes that
at the end of five years it will declare a dividend of $1.00 per share, ie D5 = 1.00. When
the dividend is declared, the market expects that the dividend will grow at a constant
rate of 5% per year forever. The risk-free rate is 5%, the company's beta is 1.2 and the
market risk premium is 5%. The required rate of return on the company's stock is
expected to remain constant. What is the current stock price?
Select one:
a. $8.62
b. $11.53
c. $7.36
d. $10.98
e. $9.89 - Answer D
You are given the following information about Company X and Company Y:
Company X has an expected mean return that is higher than that of Company Y.
Company X has lower standard deviation than Company Y
Company X has a higher beta than Company Y
Considering the above scenario which of the following statements is closest to the
truth?
Choose one:
a. Company X has a lower coefficient of variation
b. Company X has more company specific risk
c. None of the above are correct
d. Statements A and B are correct
e. Statements A, B and C are correct - Answer A
, Which of the following does NOT determine the cost of money?
Select one:
a. Production Opportunities
b. Inflation
c. Time Preference for consumption
d. Government Spending
e. Risk - Answer D
Which of the following Treasury Bonds will have the greatest amount of interest rate risk
(price risk) ?
Select one:
a. A 7 percent coupon bond which matures in 12 years
b. A 9 percent coupon bond which matures in 10 years
c. A 7 percent coupon bond which matures in 9 years
d. A 12 percent coupon bond which matures in 7 years
e. A 10 percent coupon bond which matures in 10 years - Answer A
Who are the principals for the firm?
Select one:
a. Management
b. Bondholders
c. Shareholders
d. Board of Directors
e. All are principals of the firm - Answer C
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