NABISCO NET BRINGS SWEET SUCCESS*
To maintain 10 percent annual growth in a market thats growing at only 2 percent,
Nabisco, Inc. the $7.7 billion processed-food company is putting intelligent software-gent
technology on more than 5,000 desktops. These ag
CHAPTER 16 CAPITAL STRUCTURE DECISIONS: THE BASICS
(Difficulty: E = Easy, M = Medium, T = Tough)
True-False Easy:
Bankruptcy costs 1. Answer: a Diff: E
Because creditors can foresee, to at least some extent, the costs of bankruptcy, they charge a h
CHAPTER 7 STOCKS AND THEIR VALUATION
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Total stock returns Answer: b Diff: E 1. The total return on a share of stock refers to the dividend yield less any commissions paid when the sto
CHAPTER 8 FINANCIAL OPTIONS AND THEIR VALUATION
(Difficulty: E = Easy, M = Medium, T = Tough)
True-False Easy:
Options 1. Answer: a Diff: E
An option is a contract which gives its holder the right to buy or sell an asset at a predetermined price wi
CHAPTER 15 CORPORATE VALUATION, VALUE-BASED MANAGEMENT, AND CORPORATE GOVERNANCE
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Corporate valuation model 1. Answer: b Diff: E
The corporate valuation model cannot be used for a co
CHAPTER 20 LEASE FINANCING
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Types of leases 1. Answer: a Diff: E
Many leases written today combine the features of operating and financial leases. Such leases could be called "combin
CHAPTER 19 INITIAL PUBLIC OFFERINGS, INVESTMENT BANKING, AND FINANCIAL RESTRUCTURING
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Medium:
Going public 1. Answer: b Diff: M
Going public establishes a true market value for the firm an
CHAPTER 13 ANALYSIS OF FINANCIAL STATEMENTS
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Ratio analysis 1. Answer: a Diff: E
Ratio analysis involves a comparison of the relationships between financial statement accounts so as
CHAPTER 10 THE BASICS OF CAPITAL BUDGETING: EVALUATING CASH FLOWS
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Capital budget Answer: b Diff: E 1. A firm should never undertake an investment if accepting the project would cause
CHAPTER 3 Financial Statements, Cash Flows, and Taxes
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Annual report 1. Answer: a Diff: E
The annual report contains four basic financial statements: the income statement; balance sh
CHAPTER 2 TIME VALUE OF MONEY
(Difficulty: E = Easy, M = Medium, and T = Tough) Note: Most problems assume students have a calculator with a yx feature (i.e., an exponential feature). Annuity problems for finding the interest rate or the number of pe
CHAPTER 17 CAPITAL STRUCTURE DECISIONS: EXTENSIONS
(Difficulty: E = Easy, M = Medium, T = Tough)
True-False Easy:
Taxes and capital structure 1. Answer: a Diff: E
In a world with no taxes, MM show that the capital structure of a firm does not affec
CHAPTER 5 RISK AND RETURN: EXTENSIONS
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Beta coefficient 1. Answer: a Diff: E If the returns of two firms are negatively correlated, then one of them must have a negative beta. a. Tru
CHAPTER 18 DISTRIBUTIONS TO SHARHOLDERS: DIVIDENDS AND REPURCHASES
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Optimal distribution policy 1. Answer: a Diff: E
The optimal distribution policy for a firm strikes a balance betw
CHAPTER 6 BONDS AND THEIR VALUATION
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Discounted cash flows Answer: b Diff: E 1. The market value of any real or financial asset, including stocks, bonds, or art work, may be found by
CHAPTER 9 THE COST OF CAPITAL
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Capital Answer: a 1. Capital can be defined as the funds supplied by investors. a. True b. False Component costs of capital Answer: a Diff: E 2. The com
CHAPTER 14 FINANCIAL PLANNING AND FORECASTING PRO FORMA FINANCIAL STATEMENTS
(Difficulty: E = Easy, M = Medium,
True-False Easy:
Sales forecast 1. Answer: a Diff: E
A typical sales forecast, though concerned with future events, will usually be base
CHAPTER 1 AN OVERVIEW OF CORPORATE FINANCE AND THE FINANCIAL ENVIRONMENT
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Financial manager Answer: a Diff: E 1. In general, the role of the financial manager is to plan for the acqui
CHAPTER 4 RISK AND RETURN: THE BASICS
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False Easy:
Payoff matrix Answer: a Diff: E 1. If we develop a weighted average of the possible return outcomes, multiplying each outcome or "state" by its
PS3 Fin 332
Chapter 5 (1) Callaghan Motors's bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current ma
PS4 Fin 332 Submit PS4 solution (as a group) at the beginning of class on Monday, March 24 for extra credit. To receive credit you need to make a reasonable effort to solve the problems. Also, your work needs to be clear and organized. Please staple
PS5 Fin 332
(1) Project K has a cost of $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its cost of capital is 12 percent. a) What is the project's payback period? b) What is the project's discounted payback period? c) Wh
PS5_Solution
(1) a. $52,125/$12,000 = 4.3438, so the payback is about 4 years. b. Project K's discounted payback period is calculated as follows: Annual Period Cash Flows 0 ($52,125) 1 12,000 2 12,000 3 12,000 4 12,000 5 12,000 6 12,000 7 12,000 8 12
PS6_Solution
(1) Operating Cash Flows: t = 1 Sales revenues Operating costs Depreciation Operating income before taxes Taxes (40%) Operating income after taxes Add back depreciation Operating cash flow Equipment's original cost Depreciation (80%) Boo
PS6 Fin 332 Submit PS6 solution (as a group) at the beginning of class on Monday, April 14. To receive credit you need to make a reasonable effort to solve the problems. Also, your work needs to be clear and organized. Please staple the pages togethe
PS1 Fin 332
(1) Find the future value of the following annuity. The first payment in this annuity is made at the end of year 1; that is, it is an ordinary annuity. a) $400 per year for 10 years at 10 percent. b) Now rework part a assuming the payment