BUS 224 Tutorial 6
Q1. Peirson et al. (2009), Business Finance, Chapter 7: Questions 1, 2, 3 and 6.
1.
Is risk aversion a reasonable assumption? What is the relevant measure of risk for
a risk-averse investor?
Soln: It is suggested that investors behave a
Chapter 7
Risk and return
Solutions to questions
1.
It is suggested that investors behave as though they are risk-averse when an investment
involves a significant proportion of their wealth. However, investors may exhibit riskseeking behaviour where an in
Chapter 07 Testbank
Student:
_
1. Which distribution is a list of the possible dollar returns from the investment together with the
probability of each return?
A. Normal distribution.
B. Probability distribution.
C. Both Normal distribution and Probabilit
Supplementary MCQs and Essay Questions Cost of Capital
1.
A company's overall cost of capital is
a.
*b.
c.
d.
equal to its cost debt.
a weighted average of the costs of capital for the collection of individual projects
that the company is working on.
best
Supplementary MCQ and Essay Questions Risk and Return
1.
Which of the following is the best measure of the systematic risk in a portfolio?
a.
b.
c.
*d.
variance
standard deviation
covariance
beta
Correct answer: d
Learning Objective 7.1 ~ explain the rela
MCQ Solutions Capital Structure Decision (Chapter 13)
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MCQ Solutions Cost of Capital (Chapter 14)
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MCQ Solutions Principles of Capital Structure (Chapter 12)
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MCQ Solutions Dividend Policy Chapter 11
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Chapter 4
Applying the time value of money to
security valuation
Solutions to questions
2.
It is true that the value is often sensitive to the forecast growth rate. For example, if the
current dividend is 40 cents per share and the required rate of return
Additional Practice Questions Capital Budgeting and Cash flow Principles
1. You are the CFO of MaximBody Ltd a retailer of the exercise machine MaximBody and related
accessories. Your company is considering opening up a new store in Sydney. The store will
To:
BUS 224 Learner (Kaplan/Murdoch University)
From: Jasper Tham
Corporate Finance Exam 1 Questions and Suggested Solutions
1.
Should the managers of a company own substantial numbers of shares in the
company?
Explain the advantages and disadvantages of
BUS224 -Tutorial Four Questions & Answers
To:
BUS 224 Corporate Finance Learner
From: Jasper Tham, Lecturer
1. Outline two methods of solving project evaluation problems where the projects under
consideration do not have common terminal dates.
Suggested S
BUS224 -Tutorial Three Questions
1. What is the accounting rate of return for an asset costing $40,000, depreciated straight line over
a four year life and generating $8,000 annually in after-tax income. Answer: 40%
2. You are considering an investment th
BUS224 -Tutorial Two Questions
1. Assume that you buy a 7 percent coupon, 20 year bond today when it is first issued. If interest
rates suddenly rise to 15 percent, what happens to the price of your bond? Why?
2. Murdoch Enterprises Ltd has bonds on the m
BUS224 -Tutorial Two Questions
1. Assume that you buy a 7 percent coupon, 20 year bond today when it is first issued. If interest
rates suddenly rise to 15 percent, what happens to the price of your bond? Why?
2. Explain why each of the following may not
Name of Institution: Murdoch University/Kaplan
Subject:
BUS 224 Corporate Finance
Date:
15th Oct 2014
RE:
SUPPLEMENTAL REVISION
QUESTIONS AND ANSWERS
Time Value of Money (Chp 3) Theory & Practice
Sources: Murdoch University Study Guide
Q1.
Is the yield to
Supplementary MCQ and Essay Question Capital Structure
1.
A company's capital structure is the mix of financial securities used to finance its
activities and can include all of the following except:
a.
b.
*c.
d.
shares.
bonds.
equity options.
preference s
Chapter 7
Risk and return
Solutions to questions
1.
It is suggested that investors behave as though they are risk-averse when an investment
involves a significant proportion of their wealth. However, investors may exhibit riskseeking behaviour where an in
Chapter 3
The time value of money
Solutions to questions
1.
A rate of return is the ratio of net cash inflows to net cash outflows produced by a
financial contract. It is often expressed as a percentage. The financial contract involved
may be, for example
Chapter 12
Principles of capital structure
Solutions to questions
1.
The advantage of using debt is that it may increase the returns to the companys
shareholders. However, the disadvantage is that using debt increases the risk of an
investment in the comp
Chapter 7
Portfolio theory
Solutions to questions
4.
This statement is not necessarily true. For example, assume that we have all of our
wealth invested in a very low-risk asset. We then sell off half of the initial portfolio and
invest these proceeds int
Chapter 4
Applying the time value of money to
security valuation
Solutions to questions
3.
There are two types of risk that are relevant: interest rate risk and default risk. Interest
rate risk relates to the change in the price of a debt security as a re
Chapter 14 Testbank
1. The shares of ABC Ltd have a market price of $4 and an annual dividend of 17.5
cents per share fully franked at the tax rate of 30 per cent. Calculate the dividend
yield on the shares of ABC that would be reported in the financial p
Chapter 12 Testbank
1. All companies are subject to:
A. financial risk.
B. technology risk.
C. business risk.
D. all of the given options.
2. If a company is financed entirely by equity then variations in the return to
shareholders are attributable only t
Chapter 13 Testbank
1. Non-debt tax shields can be best defined as:
A. tax deductions for interest costs.
B. tax deductions for items such as investment tax credits and tax losses carried
forward.
C. the relationship between leverage and taxes.
D. none of
Chapter 11 Testbank
1. In Australia companies generally pay dividends:
A. twice a year.
B. three times a year.
C. four times a year.
D. at least twice a year.
2. Which system allows companies to pay dividends that carry credits for income tax
paid by the
Chapter 08 Testbank
Student:
_
1. A savings-deficit unit is one:
A. whose expenditure is equal to the income generated.
B. whose expenditure exceeds its income for a particular period.
C. that needs to borrow from a financial intermediary.
D. whose expend
Chapter 09 Testbank
Student:
_
1. Ordinary shares can be best described as:
A. securities with an ownership interest in a company with no voting rights.
B. securities with an ownership interest with voting rights.
C. having a residual interest in the net