FIN571 FIN/571 FINAL EXAM/FIN571 FIN/571 FINAL EXAM

Which of the following statements is true?

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

3) Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements 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 receivables collection period (RCP) is 30 days. The payables deferral period (PDP) is about 40 days. What is 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 statements 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 results in ideas moving __________ through the organization.

18) Which of the following statements 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 new distribution center. The analysts have run the numbers 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 earnings 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 equals its book value, or $2,500,000. Compute the project's NPV, assuming Jerome's WACC equals 12%.