Exam2pdf - i FRL301 Spring 2018 ExamZ that the rm 1 Alberto...

This preview shows 1 out of 5 pages.

Image of page 1

Subscribe to view the full document.

Image of page 2
Image of page 3

Subscribe to view the full document.

Image of page 4
Image of page 5
You've reached the end of this preview.

Unformatted text preview: i FRL301 Spring 2018 ExamZ ' that the firm 1) Alberto currently owns 2,500 shares of Southern Tools. He has just been 2:21.33: prior is issuing additional shares and he is being given a chance to purchafse song; “mam to the shares being offered to the general public. What Is this type 0 an 0 ® Rights offer. B) General cash offer. C) Priority offer. D) Best efforts offer. E) Firm commitment offer. a registration statement. 5) Select an underwfiter, 5) Mobile Units recently offered 30 of 32,000 shares to the public at a purchased in accordance with wh A) Loclrup agreement Green shoe provision C) Red herring provision ,000 new shares of stock for sale. The underwriters sold a total price of $14.50 a share. The additional 2 ,000 shares were ich one of the following? D) Post-issue agreement ‘ E) Quiet provision price of the firm‘s . ' the mtl'ket 6) When a firm announces an upcomllg m“! stock Ofim existing shares tends to: A) Increase. . - - fol B) Decrease momentarily and then immediately W Wally Within an hour announcement. C) Respond, but the direction of the response is D) Remain constant. ([5) Decrease. not predictable as shown by past studies. 7) With Dutch (Open 1P0) auction underwriting: A) The selling firm receives the maximum possible price for each security 50% Each winning bidder pays the minimum price offered by any bidder. All successful bidders pay the same price per share. D) The bidder for the largest quantity receives the first alloeation of securities. B) All bidders receive at least a portion of the quantity for which they bid. 8) Which one of the following statements concerning venture capitalists is correct? A) Venture capitalists assume management responsibility for the firms they finance. B) A venture capitalist normally invests in a new idea and finances that idea until the newly-formed firm can issue an IPO. C) Most venture capitaliszsts are long-term investors in a firm. @ Exit strategy is a key consideration when selecting a venture eapitalist. E) Venture capitalists limit their services to providing money to start-up firms. 9) The discount rate assigned to an individual project should be based on the: A) Average of the firm's overall cost of eapital for the past five years. Current risk level of the overall firm. Risks associated with the use of the funds required by the project. D) Firm's weighted average cost of capital. E) Actual sources of funding used for the project. 10) Incorporating flotation costs into the analysis of a project will: A) Have no effect on the present value of the project. B) Increase the project's rate of return. (9) Increase the initial cash outflow of the project. D) Increase the net present value of the project. E) Cause the project to be improperly evaluated. JIU‘I’V' ' " '1) Th? subjective approach to project analysis: :3 L1): 3818:: discount rates 10 Projects based on the discretion of ) S“ e WACC of Firm X as the basis for the discount rate the senior managers of a firm. for a project under Y. . ' beta has C) Allows managers to randomly adjust the discount rate asslged to a project once the Project 5 been determined. D)Isusedonlywhenafirmh ' ' u-uctul'e as an all-eqmty capItal 5 'th equity as compared to those E) Applies a lower discount rate to projects that are financed totally WI that are partially financed with debt. xt year. The mark“ 12) Chelsea Fashions is ex .1 di ' end of $1.10 a share lie . pected to pay an annu . ' ? price of the stock is $21.80 and the growth rate is 4.5 percent. What is the firm s cost of «1th A) 9.24 percent @9.55percent 72v / i an L’ ‘ - O . v , C) 10.54 percent 77; 4' D) 7.91 percent E) 9.77 percent 13) Grill Works has 7 percent preferred stodt outsmdfllg that is currently selling f°':::;?:re The market rate of return is 14 percent and the firm's tax rate is 37 percent. What is e cost of preferred stock? M- ) \ 4' A)l4.54percent (00} X “ ‘7 [i B) 13.67 percent C) 13.77 percent D 13.29 percent 4.29 percent 14) The Downtowner has 950,000 shares of W valued at $38 a share along with 40,000 bonds selling for $1,020 each. What weight should be given to the debt when the firm computes its weighted average cost of capital? f 13) 53.06 percent B) 46.67 percent C) 51.79 percent D) 55.05 percent E) 48.27 percent 15) Hydro Systems has 15-yeal’20Wa coupon rate of 6 percent. Interest is paid annually. The face amount of each bond is $1,000. What is the company's pretax cost of debt if the bonds currently sell for $1,080? - g L ‘ A)5.36percent N - ml . W: (080'. L B) 5.55 percent 7 / , .2. 2. ’ 94.42 percent T (L V ‘ (NV student/f D) 5.22 percent E) 4.71 percent does not issue 16) Kelso's has a debt-equity ratio of .6 and a tax rate of 35 percent. The firm ° 4.8 reent. preferred stock. The cost of “1|“th and a" aftertax cost of debt I: pe What is the weighted avenge cost of capital? A) [1.38 percent - 0.6 910.86percent WW: (”far/(2143 7" I i: X0643 lO.46percent ( ' D)l0.67perccnt c 5109254 ow E)ll.57percent 17) The Daily Brew has adebt .Thefirmis mlyzinganew project ‘1'" requires an initial cash outlay of $420,000 for equipment. The flotation cost affiliate” for ‘uity an @pereent for debt. What is the initial cost of the pro'eet includin the flotation costs? 3456,32 B) $302400 C)$583,333 D) $368,924 E) $456,700 fit... A fiquflb t OWHlWQOSQindie/c ' » ii i . , : 13) Which one of the following is the equity risk that is most related to the daily operations of a firm? nomad a‘.jji‘,i2 A) Extrinsic n'sk B) Systematic risk C) Financial risk D) Market risk (E); Business risk 19) A firm should select the capital structure that: A) is fully unlevered. (Ev) Maximizes the value ofthe firm. C) Equatee the value of debt with the value of equity. D) Produces the highest cost of capitaL E) Minimizes taxes. 20) Which one of the following states that a firm's cost of equity capital is directly and proportionally related to the firm's capital structure? A) Homemade leverage B) M&M Proposition l (0) MM Proposition 11 D) Pecking-order theory E) Static Theory of capital structure )tuaem/ y 21) M&M Proposition I with no tax supports the argument that‘ tAXnie debt-equity ratio of a firm is completel irrelevant ° 8) The cost of equity rises as leverage rises y . C) Homemade leverage is irrelevant - D) Business risk is irrelevant. . E) Business risk has no effect on the return on assets. :2) Which one of the fouowing is . direct cost of bankruptcy? B) rhos-Inga-key company employee, (59) P m g a flew-equity ratio that is lower than the optimal ratio. D . aylng an Outside a(‘IC‘vOI-Intant to prepare bankruptcy reports. ) Bypassing a POSitive NPV project to avoid additional debt. E) Firm investing in cash reserva, 00 shares of stock outstanding. The 23) The Jean Outlet is an all-equity firm that has 152,0 COmpany has decided to borrow $1 1 million to repurchase 7,500 shares of its stock from the estate of a deceased shareholder. What is the total value of the firm if you ignore taxes? } A 22’293’333 lmllqm - _ Nb NHL $18,500,” /gll4)( % 1 [$1 L/WX C) $19,666,667 _ D) $18,387,702 ~ 13) $21,413,333 24) Winter's Toyland has a debt-equity ratio of .65. The pretax cost of debt is 8.7 percent and the required return on assets is 16.1 percent. What is the cost 01' equity if you ignore tags? A 19. y ’ x 0‘ ' ) 3lperoent ’27:: 0.19! 7‘(0«(k‘ 00,” S 20.9l percent 3 3 i C C)20.29percent 0.0 “it ‘- D) 20.46 percent E) 19.74 percent 6.7 percent and earnings before interest and taxes 25) An unlevered firm has a cost of capital of l assets has face value of debt of $650,000 of $489,602. A levered firm with the same operations and with a coupon rate of 7.5 percent that sells at par. The applicable tax rate is 35 percent. What is the value of the levered firm? 0‘ l9 E a b A) $2,398,256.67 __ -: / 0 S \ Q ‘- B) $2,001,018.21 W -, QQQBOL/Y l- 0 3C) "\ ‘0. [if-F. (I $2,397,212.30 ' - _ $2,133,136.53 \/L 2 0,59% 48” K ‘WU - - E) $2,402,509.08 ...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern