This is just a practice exam. The actual exam will differ from this one in number of questions,
degree of difficulty, type of questions, order of questions etc.
(Updates noted by Lora 2/27/16 using Track Changes)
Marquette University
College of Business A
Additional practice problems
Chapter 8
(Q13) True/False:
1. The maximum benefits to diversification between securities occurs when they are
perfectly positively correlated.
2. There is some benefit to diversification when the correlation between securiti
MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 8:
Risk and Rates
of Return
8.1 Returns: $ and %
Dollar Profit or Loss = Ending value
+ Distributions
Original Cost
Rate of return = Dollar Profit or Loss
Original Cost
82
Example 1: Calculatin
MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 16: Capital
Structure
16.1 Capital Markets: A Quick Review
Companies raise funds for growth in debt and
equity markets.
Investors have different risk preferences and
companies have varying ris
MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 11: The
Cost of Capital
11.1 The Cost of Capital: A
Starting Point
Figure 11.1 Component sources of capital.
Weighted average cost of capital (WACC)
WACC = wdRd(1 T) + wpRp + wcRs
WACC is essen
MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 10: Cash Flow
Estimation
10.1 The Importance of Cash
Flow
Cash flow vs net income or profit
102
10.2 Estimating Cash Flow for Projects: Incremental Cash
Flow
Incremental cash flow
Additional/
MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 5
Interest Rates
Why is interest rate important?
52
5.1 How Financial Institutions Quote
Interest Rates: Annual and Periodic
Interest Rates
Annual percentage rate (APR)
 Most commonly quoted

MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 9: Capital
Budgeting Decision Models
9.1 What is capital budgeting?
Analysis of potential additions to fixed
assets.
Longterm decisions; involve large
expenditures.
Should we
Very important
This is just a practice exam. The actual exam will differ from this one in number of questions,
degree of difficulty, type of questions, order of questions etc.
Marquette University
College of Business Administration
FINA3001 Fall 2015
Sample Exam 1
Name:
Additional practice problems
Chapter 3
(Q13) True/ False
1. Consider the TVM equation: An increase in the present value will decrease the future value,
other things remaining equal.
2. Consider the TVM equation: A decrease in the interest rate will decre
Additional practice problems
Chapter 10 Cash Flow Estimation
(Q13) True/False
1.
A company could show a loss for the operating period but have generated positive
cash flow for the business.
2.
Cash flow is an accounting measure of performance during a sp
Additional Practice problems
Chapter 1
(Q1 5) True/False:
1)
If a stocks market price is above its intrinsic value, then the stock can be thought of as
being undervalued, and it would be a good buy.
2)
A stocks market price would equal its intrinsic valu
Additional practice problems
Chapter 11 The Cost of Capital
(Q13) True/False
1. If a firms marginal tax rate is increased, this would, other things held constant, lower the cost
of debt used to calculate its WACC.
2. The cost of preferred stock to a firm
Additional practice problems
Chapter 7
(Q13 )True/False
1. A typical practice of many companies is to distribute part of the earnings to shareholders
through coupon payment
2. The payment of cash dividends to shareholders is a deductible expense for the
MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 6 Bonds and
Bond Valuation
6.1 What is a Bond?
Longterm debt instruments
Provide periodic interest income annuity series
Return of the principal amount at maturity future
lump sum
62
Figure
MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 7:
Stocks and
Stock Valuation
7.1 Facts About Common Stock
Represents ownership
No maturity date
Common shareholders rights
Cash flow rights:
Dividend: not fixed, nontax deductible
Claim
MARQUETTE UNIVERSITY
COLLEGE OF BUSINESS

FINA 3001
Chapter 4 The Time
Value of Money
(Part 2)
4.1 Future Value of Multiple Payment
Streams
1. Treat each of the cash flows as a lump sum
2. Calculate each cash flows future value
3. Sum up the individual f
Ryan Buckley
The critical value is found by looking it up on the Tdistribution chart. The 25 degrees of
freedom are found by the 29 observations minus the 3 number of variables minus 1. A 10%
level of significance onetailed and 25 degrees of freedom wil
Ryan Buckley
November 16, 2015
Investment Analysis
Bezos #8
Today, I invested 2 million dollars in Electronic Arts, Inc. even though it breached its
50day moving average in a bearish manner. I figure get the stock when it is at a discount
because I belie
Ryan Buckley
Investment Analysis
September 17, 2015
Bezos #2
I had previously bought Cablevision and the stock was steadily making money. This
week Cablevision surged after sealing a deal to be bought by Altice for $34.90 a share,
which is a 22% premium t
Ryan Buckley
Investment Analysis
October 7, 2015
Benzos #4
I started by buying Ralph Lauren because the Founder, Ralph Lauren, will step aside
as chief executive and be replaced by the President of Gaps Old Navy Division. This is
promising because he has
Ryan Buckley
Investment Analysis
October 12, 2015
Bezos #5
I initially purchased JC Penny stock and was forced to sell the stock because of a
failed strategy that they tried. It is difficult to recover from selfinflicted wounds without
the necessary cash
Ryan Buckley
Investment Analysis
October 7, 2015
Benzos #4
I started by buying Ralph Lauren because the Founder, Ralph Lauren, will step aside
as chief executive and be replaced by the President of Gaps Old Navy Division. This is
promising because he has
Ryan Buckley
Investment Analysis
September 14, 2015
Bezos #1
When creating my stock portfolio, I focused on diversifying the stocks I chose to
minimize my risk. My goal at first was to not boost performance, but to improve my returns
for the level of risk
Chapter 14:
Borrowers protections: amounts authorized to be issued, interst rate, due dates, call provisions
Lenders protections: property pledged as security, sinking fun req, working cap & div restrict, limitations concerning add debt
Best time for call
Chapter 16:
Convertible bonds No gains or losses recognized; Use carrying value, market price irrelevant in conversion
Issuance: Dr. Cash; Cr. Premium, BP/PS. Conversion: Dr. BP/PS (CV), Premium; Cr. CS, APICCS. Sweetener: Dr. Debt conversion exp; Cr. Ca