1. What is an advantage of the corporate form?
2. What is the major disadvantage of the corporate
3. What is agency cost and between what two
stakeholders does this occur?
4. What are two things that can be done to reduce or
mitigate agency cost?
5. What is the difference between a public and
6. What is the title of the top financial officer in
7. Give two reasons managers should act in the
8. What is the financial goal for most publically
9. How would you find the value of a$100 perpetuity with
at required return of 10%?
10. Where would you find an annuity in reality?
11. Is the annual percentage rate or (APR) an
effective rate or a simple rate of interest?
12. What is the difference between the present value
and the net present value?
13. What happens to the effective rate of return if
the nominal rate is compounded more often?
14. How often do bonds issued inside the United States
typically pay interest payments?(annual or semi-annual)
15. What is unique about how US treasury bonds are
16. If overall interest rates increase, which bond
would have a greater price change? (a 20 year 6% bond or a 2 year 6% bond)
17. What is the normal shape of the term structure of
18. What is the expectations theory of the term
structure of interest rates?
19. What is the difference between the real interest
rate and the nominal risk-free interest rate?
20. What do we typically use as a proxy for the
nominal risk free interest rate in the US?
21. What is the job of the specialist?
22. How could a company have high earnings and yet a
low ability to pay out dividends?
23. What happens to the growth rate as a company
24. How would you use market information to get a
ballpark guess at the required return?
25. To be a value increasing growth opportunity the
return on the project must be higher than what?
26. What is the payout ratio?
27. What are free cash flows?
28. Which decision model gives its answer as wealth
created per dollar initially invested?
29. Which decision model gives its answer in years in
present value terms?
30. What are two major weaknesses of the payback
31. Between Exxon and a small business, which is more
likely to use the profitability index?
32. What causes multiple internal rates of return?
33. What is the difference between soft rationing and
34. Real cash flow should be discounted at what rate
of return? Real or nominal?
35. What is meant by the incremental payoff from a
36. I have a piece of land that I am currently
renting to a farmer. I am considering
building a business on this property.
Is this an example of an opportunity cost or a sunk cost?
37. My business is growing and accounts payable is
expected to increase from $10,000 to $15,000 from this year to next. Would this be a source or use of funds or a
positive or negative cash flow?
38. What is the role of depreciation in capital
39. What does the equivalent annuity method allow you
40. Where are the interest cost accounted for in the
capital budgeting process (in the estimated cash flows or in the discount rate for
41. Acceptance of the project will cause overhead
that is presently $100,000 to increase to $110,000. How much if any overhead should be allocated
to the project?
42. What is the present value of $100
expected in two years from today at a discount rate of 6% is:
45. A bond has a coupon rate of 5%, par or
maturity value of $1000 and matures in five years. The interest payments
are made annually. Calculate the price of the bond if the market rate is
46. A bond has a coupon rate of 5%, par or
maturity value of $1000 and matures in three years. The interest payments
are made annually. Calculate the yield to maturity of the bond if the
price of the bond is $1060.
47.The In-Tech Co. has just paid a dividend
of $1 per share and is expected to pay $1.25 in year 1. The dividends are
expected to grow at 25% per year for the next three years (years 2,3,4)and
at the rate of 5% per year thereafter. If the required rate of return on
the stock is 18%(APR), what is the current value of the stock?
Given the following cash flow for project A: C0= -3,000, C1= +500, C2= +1,500 and C3= +5,000. Using a 15% discount rate:
48.Calculate the NPV
49.Calculate the PI
50.Calculate the IRR
51.Calculate the Payback
52.Calculate the PV Payback
53.For project Z, year 5 inventories increase by $6,000, accounts receivables increase by $4,000 and accounts payables increase by $3,000. Calculate the incremental investment in working capital for year 5.
**** Can be a few word answers each! DO NOT NEED ANY LONG ANSWERS***