Multiple choice

1. Which of the following statement is true?

2. Book value, or net book value, refers to

3. Assume that the par value of a bond is $1000. consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statement is true?

4. If the yield to maturity for a bond is less than the bond’s coupon rate, the market value of the bond is______.

5. For investors, the proper measure of a stock’s risk is its __________.

6. A company’s beta is -1.5. If the overall stock market decreases by 5%, what is the expected change in the firm’s stock price?

7. Which of these investments would you expect to have the highest rate of return for the next 20 years?

8. Dimensions of risk include ________.

9. One problem with using negative values for the proportion invested in the riskless asset to represent a borrowed amount is that the implied borrowing rate of interest is the same as the_________.

10. If you were willing to bet that the overall stock market was heading up on a sustained basis, it would be logical to invest in

11. Stony products has an inventory conversion period (ICP) of about 70 days. The receivable collection period (RCP) is 30 days. The payables deferral period (PDP) is about 40 days. What is the stony’s cash conversion cycle (CCC)?

12. The main source of short-term operating capital is_____.

13. An investor’s risky portfolio is made up of individual stocks. Which of the following statement about this portfolio is true?

14. An all-equity financed firm would_________.

15. If a firm wants to lower its weighted average cost of capital (WACC), one way to do so would be to

16. Boeing is a world leader in commercial aircraft. In the face of competition. Boeing often faces a critical________ decision: whether to develop a new generation of passenger aircraft.

17. Ideas for capital budgeting projects come from all levels within an organization. The bottom up process result in ideas moving_______ through the organization.

18. Which of the following statement is true?

19. In practice, the _______ rule is the preferred criteria to accept or reject a capital investment project.

20. The Jerome Inc. western regional branch has been looking to install a a new distribution center. The analysts have run the number on the distribution center costs and annual inflow from the investment. The project will cost $5 million at the beginning of the first year. The project will generate $1 million in earning before interest and taxes at the end of each year. Jerome is in the 35% tax bracket and annual depreciation equates to $500,000 per year. The distribution center’s end of the fifth year’s salvage equal its book value, or $2,500,000. compute the project’s NPV, assuming Jerone’s WACC equals 12%.

21. The__________ method breaks down when evaluating projects in which the sign of the cash flow changes.

22. Studies show systematic differences in capital structures across industries. These are due primarily to differences in ___________.

23. Capital structure decisions refer to the.

24. Which of the following statement concerning preferred stock is true?

25. Mortgage bonds are___________.

26. _______ says to calculate the net advantage of leasing based on the incremental after-tax benefits that leasing will provide.   

27. From the lessee’s viewpoint, the relevant discount rate for evaluating a lease versus by decision is the_________.

28. The wholesale price for captain john’s is $0.612 per loaf, and the variable cost of production is $0.387 per loaf. Captain John’s expects that expansion will allow them to sell an additional 4.5 million loaves in the next 5 years. What additional revenues minus expenses will be generated from expansion?

29. Which of the following statement is true?

30.In efficient markets, as in the United States, market price are not expected to be_______.