FINAL - Name:_ MAN 321 Corporate Finance Final Examination...

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Name:____________________ MAN 321 Corporate Finance Final Examination Fall 2001 There are three sections on this examination. Section I contains 10 fill-in-the-blanks questions. Answer these questions by entering your answer in the blanks. Section II has 10 multiple choice questions. Enter your answers by circling the appropriate letter on the exam. Section II contains 5 problems. Answer the problems in the spaces provided on the exam. Good luck SECTION I. Fill-in-the-blanks Questions (1 point each) 1. A(n) _____bond_________ is a long-term promissory note issued by a business firm or governmental unit. 2. The stated face value of a bond is referred to as its _par_value. 3. The date at which the face value of a bond is repaid to each bondholder is known as the __maturity_ __date__. 4. Market interest rates and bond prices move in _opposite____ directions from one another. 5. Like other financial assets, the value of common stock is the __present__ value of a future stream of income. 6. The income stream expected from a common stock consists of a(n) _dividend___ yield and a(n) _capital__ __gains_ yield. 7. Financial leverage refers to the use of __debt___ financing. 8. Expected EPS generally __increases___ as the debt/assets ratio increases. 9. A firm with __fluctuating__ earnings is most appropriate for using the policy of “extra” dividends. 10. A stock split involves a reduction in the __par__ ___value__ of the common stock, but no accounting transfers are made between accounts. 1
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SECTION II. Multiple Choice Questions (1 point each) 1. Myron Gordon and John Lintner believe that the required return on equity increases as the dividend payout ratio is decreased. Their argument is based on the assumption that a. Investors are indifferent between dividends and capital gains. b. Investors require that the dividend yield and capital gains yield equal a constant. c. Capital gains are taxed at a higher rate than dividends. d. Investors view dividends as being less risky than potential future capital gains. e. Investors value a dollar of expected capital gains more highly than a dollar of expected dividends because of the lower tax rate on capital gains. 2. In the real world, we find that dividends
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This note was uploaded on 02/13/2012 for the course ECON 101 taught by Professor Teerana during the Spring '11 term at Thammasat University.

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FINAL - Name:_ MAN 321 Corporate Finance Final Examination...

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