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AFF310_MT1_Fall 2019_Solution.pdf - AFF 310 Principles of...

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AFF 310 Principles of Finance IISchool of Accounting and FinanceRyerson UniversityMid-Term Exam 1SolutionOctober 4, 2019Name: __________________________Student ID: _____________________________Section #: _______________________Professor: ______________________________Time allowed:2 hoursAids allowed:Closed book except for an 8’1/2” by 11’ note sheetand ExcelPlease answer all the multiple-choice questions on the scan sheet. Please answer all non-multiple-choice questions in the space provided.The exam is out of 60.All multiple-choice problems are worth 2 marks each.Part I. Multiple-Choice Problems__________ (20)Part II. Quantitative ProblemsQuestion 1__________ (10)Question 2__________ (14)Question 3__________ (9)Question 4__________ (7)Total__________ (60)
Part I. Multiple Choice Problems1.Which of the following uses the cost of capital in its computation?I)The NPV calculationII)The valuation of the firm
2.Which of the following is a factor that affects the WACC, but is not in control of the firm?I)The firm’s investment policyII)The firm’s capital structure policy
3.Which of the following may cause a divisional cost of capital of a firm to be different fromthe overall WACC of the firm?I)The division’s investments are much riskier than the investments made by the rest of firmII)The division uses much more debt to finance its investments than the rest of the firmdoes..
4.Which of the following type of capital used by the firm receives favorable tax treatment?A.Common stockB.Preferred stockC.Long-term debtD.Accounts payable
5.Which of the following is the most appropriate discount rate to use for valuing of a firm?
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Term
Fall
Professor
Kaplan
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