BU 440 BU440 EXAM 3 ANSWERS - ASHWORTH

BU 440 BU440 EXAM 3 ANSWERS - ASHWORTH

DOWNLOAD HERE⬊

BU440 Managerial Finance II Exam 3 Answers
Question 1

5 / 5 points
International Geographica is adding a new magazine project to the company portfolio and has the following information: The expected market return is 12%, the risk-free rate is 4%, and the expected return on the new project is 20%. What is the beta of the project?
Question options:
a) 
1.00

b) 
1.50

c) 
1.75

d) 
2.00

Question 2

5 / 5 points
Which of the following is the proper way to adjust the cost of debt to estimate the after-tax cost of debt? 
Question options:
a) 
Rd ÷ (1 + Tc)

b) 
Rd ÷ (1 – Tc)

c) 
Rd × (1 – Tc)

d) 
Rd × (1 + Tc)

Question 3

5 / 5 points
When doing capital budgeting, it is necessary to assign the appropriate cost of capital for each individual project that reflects that project's:
Question options:
a) 
life.

b) 
cash flows.

c) 
riskiness.

d) 
managers.

Question 4

5 / 5 points
The __________ is the cost of each financing component multiplied by that component's percent of the total funding amount.
Question options:
a) 
NPV

b) 
IRR

c) 
cost of capital

d) 
cost of debt

Question 5

5 / 5 points
The ________ is the return the bank or bondholder demands on new borrowing.
Question options:
a) 
IRR

b) 
WACC

c) 
cost of equity

d) 
cost of debt

Question 6

5 / 5 points
Which of the following is NOT considered a part of the firm's capital structure?
Question options:
a) 
Long-term debt

b) 
Retained earnings

c) 
Inventory

d) 
Preferred stock

Question 7

5 / 5 points
The cost of debt could be which of the following?
Question options:
a) 
The required return on money borrowed as a long-term loan from a bank

b) 
The required return on money borrowed from a venture capitalist

c) 
The yield-to-maturity on money raised by selling bonds

d) 
All of the choices above could be considered the cost of debt.

Question 8

5 / 5 points
The adjusted __________ is the correct discount rate to use when evaluating a firm's average-risk projects.
Question options:
a) 
IRR

b) 
WACC

c) 
cost of equity

d) 
cost of debt

Question 9

5 / 5 points
Under which of the following circumstances is the pure play method of estimating a project's beta particularly useful?
Question options:
a) 
When the firm is looking to expand its current business operations, doing essentially the same work.

b) 
When the firm is looking to expand its current business operations into a brand new area unlike any of its internal projects.

c) 
When the firm is looking to expand its current business operations. The work will be essentially the same as current operations but there is no obvious outside provider of the same service or product.

d) 
The pure play method works equally effectively under each and all of the above scenarios.

Question 10

0 / 5 points
Once we determine the adjusted WACC for a company, we select a decision model and use the adjusted WACC with a project’s estimated ________ to determine if we should accept or reject the project.
Question options:
a) 
net present value

b) 
internal rate of return

c) 
future cash flows.

d) 
cost of capital

Question 11

5 / 5 points
A/An ________ facilitates the issuing and sale of bonds and for this service is paid a fee.
Question options:
a) 
commercial banker

b) 
investment banker

c) 
dealer

d) 
broker

Question 12

5 / 5 points
Takelmer Industries has a different WACC for each of three types of projects. Low-risk projects have a WACC of 8%, average-risk projects a WACC of 10%, and high-risk projects a WACC of 12%. Which of the following projects do you recommend the firm accept?
 
Project
Level of Risk
IRR
A
Low
9.50%
B
Average
8.50%
C
Average
7.50%
D
Low
9.50%
E
High
14.50%
F
High
17.50%
G
Average
11.50%
Question options:
a) 
A, B, C, D, G

b) 
B, C, E, F, G

c) 
A, D, E, F, G,

d) 
A, B, C, D, E, F, G

Question 13

5 / 5 points
Which of the following would be classified as debt lenders for a firm?
Question options:
a) 
Preferred shareholders, banks, and nonbank lenders

b) 
Nonbank lenders, common shareholders, and commercial banks

c) 
Preferred shareholders, common shareholders, and suppliers

d) 
Suppliers, nonbank lenders, and commercial banks

Question 14

5 / 5 points
__________ refers to a method of matching a single project of a company to another company with a single business focus in an effort to assign an appropriate level of risk to the project.
Question options:
a) 
Ghosting

b) 
Pure play

c) 
Outside assignment

d) 
Subjective assignment

Question 15

5 / 5 points
In capital budgeting, the appropriate decision rule for an average-risk project is to accept it if the ________ is greater than the WACC.
Question options:
a) 
NPV

b) 
IRR

c) 
cost of equity

d) 
cost of debt

Question 16

5 / 5 points
Pricing preferred stock is most similar to pricing:
Question options:
a) 
constant growth common stock.

b) 
a perpetuity.

c) 
a zero-coupon bond.

d) 
a three-month Treasury bill.

Question 17

5 / 5 points
Market values require multiplying the _________ of each component source of capital by the _________ of debt, preferred stock, and common stock.
Question options:
a) 
price; quantity

b) 
book value; quantity

c) 
price; book value

d) 
None of the above

Question 18

5 / 5 points
Which of the items below is sometimes termed hybrid equity financing?
Question options:
a) 
Retained earnings

b) 
Preferred stock

c) 
Callable bonds

d) 
Variable rate bonds

Question 19

5 / 5 points
A firm's capital structure can be determined by examining which parts of the firm's balance sheet?
Question options:
a) 
The long-term assets

b) 
The debt and equity

c) 
The short-term assets and liabilities

d) 
None of the above, because a firm's capital structure is best observed on the income statement.

Question 20

5 / 5 points
An investment banker's fees are part of the __________ realized for issuing new debt or equity.
Question options:
a) 
flotation costs

b) 
opportunity costs

c) 
revenues

d) 
Benefits


Comments

Post a Comment