課程名稱︰ 財務管理
課程性質︰ 必修
課程教師︰盧秋玲
開課學院：管院
考試日期（年月日）︰2021.06.08
考試時限（分鐘）：2小時
這次採線上谷狗表單作答
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Financial Management: Final Exam
Title: Financial Management
Total score：100%
MULTIPLE CHOICE. Choose the one alternative that best completes the statement
or answers the question.
請於下列50題中選擇45題作答，計分方式一律以45題扣除答錯題數計算 (例如：若作答47
題，其中10題答錯，那就是以【45題-10題】計分)
1. If a stock's P/E ratio is 13.5 at a time when earnings are $3 per year and
the dividend payout ratio is 40%, what is the stock's current price?
A) $40.50
B) $22.22
C) $24.30
D) $18.00
2. Which one of the following risks can be progressively eliminated by adding
stocks to a portfolio?
A) Specific risk
B) Market risk
C) Systematic risk
D) Inflation rate risk
3. Increasing debt financing will do all of the following except:
A) cause stockholders to demand a higher return.
B) cause investors to demand a higher interest rate on debt.
C) decrease the firm's cost of common equity.
D) increase the risk to the firm's common stockholders.
4. A project that increased sales was accompanied by a $50,000 increase in inv
entory, a $20,000 increase in accounts receivable, and a $25,000 increase in a
ccounts payable. Assuming these amounts remain constant, by how much has net w
orking capital increased?
A) $30,000
B) $45,000
C) $25,000
D) $5,000
5. A project costs $3 million, and is expected to generate $1 million in cash
flows for the next 4. If the opportunity cost of capital is 15%, the project's
return would plot:
A) on the security market line, with a beta of 1.0.
B) on the security market line.
C) below the security market line.
D) above the security market line.
6. A company owns a tract of timber that will keep growing for a number of yea
rs. It calculates that the timber's value less the cost of harvesting is curre
ntly $50,000 and that this figure will grow by 10% in the next year and by 5%
in the following year. If the cost of capital is 8%, when should the company h
arvest the timber?
A) today.
B) year 2.
C) year 1.
D) harvest a third of the timber each year.
7. Additional paid-in capital refers to:
A) a firm's treasury stock.
B) funds borrowed from a bank or bondholders.
C) a firm's retained earnings.
D) the difference between the issue price and the par value.
8) Reinvesting earnings into a firm will not increase the stock price unless:
A) the new paradigm of stock pricing is maintained.
B) true depreciation is less than reported depreciation.
C) the return on the new investments exceeds the firm's required return.
D) the firm's dividends are growing also.
9. Which of these statements is correct? Free cash flow
A) is available to be paid out to investors as interest or dividends, or to re
pay debt or buy back stock.
B) is positive if the company is issuing debt or stock.
C) is another term for retained earnings.
D) is equal to net income.
10. An investor divides her portfolio into three equal parts, with one part in
Treasury bills, one part in a market index, and one part in a mutual fund wit
h beta of 1.50. What is the beta of the investor's overall portfolio?
A) 1.00
B) 1.17
C) 0.83
D) 1.25
11. Which one of the following statements is correct concerning sensitivity an
alysis?
A) It can guarantee a project's success.
B) Several variables are allowed to change concurrently.
C) It ignores interrelationships between variables.
D) It considers all feasible variable combinations.
12. A private placement of securities involves:
A) a nonpublic sale of securities to a limited number of investors.
B) nondisclosure of the issuing firm's name until after the sale.
C) selling only to the firm's current investors.
D) the exchange of convertible bonds for equity.
13. Which of the following statements is true for a project with a $20,000 ini
tial cost, cash inflows of $6,667 per year for 6 years, and a discount rate of
15%?
A) Its payback period is 3 years.
B) Its profitability index is 0.104.
C) Its IRR is 17.85%.
D) Its NPV is $2,094.
14. Which one of the following is not accurate in depicting the cash flows fro
m operations for an all-equity firm?
A) (revenues cash expenses)(1 tax rate) + (depreciation 휠tax rate)
B) (net profit + depreciation)
C) (revenues expenses taxes)
D) (revenues cash expenses taxes)
15. The higher the standard deviation of a stock's returns, the:
A) lower the level of specific risk.
B) higher the accuracy of predictions of the stock's return for any given year
.
C) lower the expected rate of return.
D) wider the dispersion of those returns over time.
16. New projects can have multiple effects on a firm. Which one of the followi
ng appears to be a positive indirect effect?
A) Sales of replacement parts are expected in the future.
B) The sales force will need to be increased over the life of the project.
C) Additional working capital will be required at the start of the project.
D) The cost of employee benefits will increase due to new hires.
17. What is the NPV of a 6-year project that costs $100,000, has annual revenu
es of $50,000 and costs of $15,000? Assume the investment can be depreciated f
or tax purposes straight-line over 6 years, the corporate tax rate is 21%, and
the discount rate is 14%.
A) $14,782.09
B) $15,560.04
C) $3,411.14
D) $21,131.99
18. When underwriters issue securities on a best efforts basis, they:
A) sell as much of the stock as possible, but with no guarantee.
B) buy the entire issue from the firm.
C) submit a bid for purchase, which the issuer compares to other bids.
D) guarantee that the issuer will be charged the minimum spread.
19. Shelf registration was enacted to allow:
A) the prospectus to be distributed after the sale of securities begins.
B) the Department of Justice to prosecute those guilty of insider trading.
C) underwriters to join together in syndication.
D) a joint filing for multiple issues of a single security.
20. Your broker suggests that you can make consistent, excess profits by purch
asing stocks on the 20th of the month and selling them on the last day of the
month. If this is true, then:
A) the market violates even weak-form efficiency.
B) prices follow a random walk.
C) insiders will be the only investors to profit.
D) the market is only semi strong-form efficient.
21. A firm has a debt-to-value ratio of 40%, a cost of equity of 14%, and an a
fter-tax cost of debt of 5.5%. It plans to launch a new product that will prod
uce cash flows of $398,000 next year and $211,000 in year 2. If this project i
s about as risky as the firm's existing assets, what is the present value of t
he project?
A) $458,008
B) $532,349
C) $500,614
D) $481,707
22. What proportion of earnings is being plowed back into the firm if the sust
ainable growth rate is 8% and the firm's ROE is 20%?
A) 40%
B) 60%
C) 80%
D) 20%
23. A stock is expected to return 11% in a normal economy, 19% if the economy
booms, and lose 8% if the economy moves into a recessionary period. Economists
predict a 65% chance of a normal economy, a 25% chance of a boom, and a 10% c
hance of a recession. What is the expected return on the stock?
A) 11.23%
B) 12.06%
C) 11.10%
D) 11.98%
24. If the firm's degree of operating leverage is 4.5, what percentage change
in sales will result in a 3% rise in profits?
A) 1.50%
B) 0.33%
C) 3.03%
D) 0.67%
25. Currently, M & S Inc. has 2 million shares outstanding selling at $70 a sh
are. A rights issue will be made that allows 1 share to be purchased for every
5 shares currently held by stockholders for $40 each. Which one of the follow
ing is true?
A) The stock price will fall to $65.
B) The total value of the firm will equal $124 million.
C) The number of shares outstanding will fall to 1.6 million.
D) The firm will raise $13.33 million.
26. You are analyzing a project that is equivalent to borrowing money. This pr
oject's:
A) initial cash flow is an outflow of funds.
B) acceptance requires its IRR to exceed the cost of capital.
C) NPV graph rises as discount rates decrease.
D) value increases when the cost of capital increases.
27. A manufacturer contemplates a change in technology that would reduce fixed
costs from $800,000 to $600,000, and reduce depreciation expense from $125,00
0 to $100,000. However, the ratio of variable costs to sales would increase fr
om 68% to 80%. What would be the change in the break-even level of revenues? (
Accounting break-even)
A) Increase of $574,750
B) Increase of $609,375
C) Decrease of $211,250
D) Decrease of $341,675
28. What is the expected constant-growth rate of dividends for a stock current
ly priced at $50, that just paid a dividend of $4, and has a required return o
f 18%?
A) 5.50%
B) 9.26%
C) 3.41%
D) 12.5%
29. What is the standard deviation of returns for an investment that is equall
y likely to return 100% as it is to provide a 100% loss?
A) 71%
B) 50%
C) 0%
D) 100%
30. Al's Market plans to close after 3 more years. The firm expects to have fr
ee cash flows of $148,000 next year, $128,000 in Year 2, and $65,000 in Year 3
after incurring the costs of closing. The firm's cost of equity is 15.5% and
its after-tax cost of debt is 6.2%. What is the present value of the firm if i
ts debt to value ratio is 30%?
A) $277,467
B) $312,020
C) $248,915
D) $301,004
31. What is the economic break-even level (NPV break-even) of sales for a proj
ect costing $4,000,000 and generating annual cash flows equal to 0.30 휠sales
$450,000? Assume the project will last 10 years and require a discount rate
of 12%.
A) $13,783,333
B) $3,859,789
C) $2,359,047
D) $2,093,654
32. A warrant grants its holder the right to do which one of these prior to a
specified date?
A) Purchase shares at a predetermined price
B) Sell common shares at a predetermined price
C) Exchange stock for bonds at a specified price
D) Convert debt into a specified number of shares
33. Suppose that the total value of dividends to be paid by companies in the N
arnian stock market index is $100 billion. Investors expect dividends to grow
over the long term by 5% annually, and they require a 10% return. Now a collap
se in the economy leads investors to revise their growth estimate down to 4%.
By how much should market values change?
A) 16.67%.
B) +20%.
C) zero.
D) 20%.
34. A stock is expected to pay a year-end dividend of $8 and then to sell at a
price of $109. The risk-free interest rate is 4%, the expected market return
is 12% and the stock has a beta of 0.8. What is the stock price today?
A) $98.73.
B) $105.98.
C) $102.99.
D) $109.00.
35. Based on the random walk theory, if a stock's price decreased last week, t
hen this week the price:
A) has an equal chance of going either up or down.
B) will reverse last week's loss and go up.
C) will stand still until new information is released.
D) will continue last week's decline.
36. Assume a 5-year project has a base-case NPV of $213,000, a tax rate of 21%
, and a cost of capital of 14%. What will be the worst-case NPV if the annual
after-tax cash flows are reduced in that scenario by $35,000 for each of the 5
years?
A) $92,842.17
B) $120,157.83
C) $92,842.17
D) $120,157.83
37. What happens to the expected portfolio return if the portfolio beta increa
ses from 1.0 to 1.5, the risk-free rate decreases from 5 to 4%, and the market
risk premium increases from 8 to 9%?
A) It increases from 13 to 17.5%.
B) It increases from 12 to 14.0%.
C) It increases from 12 to 12.5%.
D) It increases from 13 to 13.5%.
38. You can continue to use your less efficient machine at a cost of $8,000 an
nually. Alternatively, you can purchase a more efficient machine for $12,000 p
lus $5,000 annual maintenance. If the new machine lasts 5 years and the cost o
f capital is 15%, you should:
A) buy the new machine and save $600 in equivalent annual costs.
B) keep the old machine and save $388 in equivalent annual costs.
C) buy the new machine and save $388 in equivalent annual costs.
D) keep the old machine and save $580 in equivalent annual costs.
39. How much of a stock's $30 price is reflected in PVGO if it expects to earn
$4 per share, has an expected dividend of $2.50, and a required return of 20%
?
A) $6
B) $0
C) $8
D) $10
40. Plasti-tech Inc. is financed 60% with equity and 40% with debt. Currently,
its debt has a pretax interest rate of 12%. Plasti-tech's common stock trades
at $15.00 per share and its most recent dividend was $1.00. Future dividends
are expected grow by 4%. If the tax rate is 21%, what is Plasti-tech's WACC?
A) 7.39%
B) 10.35%
C) 11.20%
D) 9.57%
41. The company cost of capital may be an inappropriate discount rate for a ca
pital budgeting proposal if:
A) it results in a negative NPV for the proposal.
B) the company expects to earn more than the risk-free rate.
C) the company has specific risk.
D) the project has a different degree of risk from the company.
42. The market portfolio has an expected return of 18% and the risk-free rate
is 6%. An investor borrows $100 at the risk-free rate and invests this and a f
urther $100 of his own in the market portfolio. What is his expected return?
A) 18.6%
B) 19.6%
C) 21.6%
D) 30.0%
43. A firm has 12,500 shares of stock outstanding that sell for $42 each. The
book value of equity is $400,000. The firm has also issued $250,000 face value
of debt that is currently quoted at 101.2. What value should be used as the w
eight of equity when computing WACC?
A) 72.09%
B) 69.74%
C) 67.48%
D) 61.54%
44. What happens in the case of a bond selling for $1,000 that can be converte
d to 20 shares of stock that are currently selling for $80 per share?
A) The bondholder will lose $100.
B) The bondholder will choose to convert.
C) The bond's price will go down to $900.
D) The stock will go down to $50 per share.
45. The purpose of a sinking fund is to:
A) reduce the par value of stock over time.
B) allow risky corporations to avoid bankruptcy.
C) periodically retire debt prior to final maturity.
D) take advantage of the tax break on preferred stock.
46. Some investors believe that the decision by management to issue equity as
opposed to issuing debt is a signal that:
A) the stock is currently overvalued.
B) a shelf registration of securities will occur.
C) the firm will avoid dilution of stock value.
D) the stock is currently undervalued.
47. When investors are not capable of making superior investment decisions on
a consistent basis based on past prices or public or private information, the
market is said to be:
A) fundamentally efficient.
B) strong-form efficient.
C) semi strong-form efficient.
D) weak-form efficient.
48. A corporation's net worth is composed of the:
A) book value of common equity plus par value of debt.
B) par value plus additional paid-in capital.
C) book value of common equity plus preferred stock.
D) retained earnings less treasury stock.
49. What would be the approximate expected price of a stock when dividends are
expected to grow at a 25% rate in each of years 2 and 3, and then grow at a c
onstant rate of 5% if the stock's required return is 13% and next year's divid
end will be $4.00?
A) $76.44
B) $67.60
C) $68.64
D) $62.08
50. How much will a firm receive in net funding from a firm commitment underwr
iting of 250,000 shares priced to the public at $40 if a 10% underwriting spre
ad has been added to the price paid by the underwriter? Additionally, the firm
pays $600,000 in legal fees.
A) $8,490,909
B) $8,545,455
C) $8,460,025
D) $8,400,000