A portfolio is:
A. a group of assets, such as stocks and bonds, held as a collective unit by an investor.
B. the expected return on a risky asset.
C. the expected return on a collection of risky assets.
D. the variance of returns for a ri
One key reason a long-term financial plan is developed is because:
A. the plan determines your financial policy.
B. the plan determines your investment policy.
C. there are direct connections between achievable corporate growth and the fi
The flow-to-equity (FTE) approach in capital budgeting is defined to be the:
A. discounting all cash flows from a project at the overall cost of capital.
B. scale enhancing discount process.
C. discounting of the levered cash flows to t
An efficient capital market is one in which:
A. brokerage commissions are zero.
B. taxes are irrelevant.
C. securities always offer a positive rate of return to investors.
D. security prices are guaranteed by the U.S. Securities and Exc
The book capital of a corporation is determined by:
A. the sum of the capital in excess of par and the retained earnings.
B. the par value of preferred stock.
C. the sum of the treasury stock and the preferred stock.
D. the number of sh
In a lease arrangement, the owner of the asset is:
A. the lesser.
B. the lessee.
C. the lessor.
D. the leaser.
E. None of these.
In a lease arrangement, the user of the asset is:
A. the lesser.
B. the lessee.
C. the lessor.
D. the le
A financial contract that gives its owner the right, but not the obligation, to buy or sell a specified asset at
an agreed-upon price on or before a given future date is called a(n) _ contract.
An equity issue sold directly to the public is called:
A. a rights offer.
B. a general cash offer.
C. a restricted placement.
D. a fully funded sales.
E. a standard call issue.
An equity issue sold to the firm's existing stockholders
The use of personal borrowing to change the overall amount of financial leverage to which an individual
is exposed is called:
A. homemade leverage.
B. dividend recapture.
C. the weighted average cost of capital.
D. private debt placemen
In the equation R = + U, the three symbols stand for:
A. average return, expected return, and unexpected return.
B. required return, expected return, and unbiased return.
C. actual total return, expected return, and unexpected return.
The excess return required from a risky asset over that required from a risk-free asset is called the:
A. risk premium.
B. geometric premium.
C. excess return.
D. average return.
The average squared difference between th
The weighted average of the firm's costs of equity, preferred stock, and after tax debt is the:
A. reward to risk ratio for the firm.
B. expected capital gains yield for the stock.
C. expected capital gains yield for the firm.
An analysis of what happens to the estimate of the net present value when you examine a number of
different likely situations is called _ analysis.
An analysis of
An annuity stream of cash flow payments is a set of:
A. level cash flows occurring each time period for a fixed length of time.
B. level cash flows occurring each time period forever.
C. increasing cash flows occurring each time period
The stock valuation model that determines the current stock price by dividing the next annual dividend
amount by the excess of the discount rate less the dividend growth rate is called the _ model.
A. zero growth
B. dividend growth
The person generally directly responsible for overseeing the tax management, cost accounting, financial
accounting, and information system functions is the:
D. chairman of the board.
E. chief ex
A bond that makes no coupon payments and is initially priced at a deep discount is called a _
E. zero coupon
An asset characterized by cash flows that increase at a constant rat
Payments made out of a firm's earnings to its owners in the form of cash or stock are called:
C. share repurchases.
E. stock splits.
Payments made by a firm to its owners from sour
A security issued in the United States that represents shares of a foreign stock and allows that stock to be
traded in the United States is called a(n):
A. American Depository Receipt.
B. Yankee bond.
C. Yankee stock.
The complete absorption of one company by another, wherein the acquiring firm retains its identity and
the acquired firm ceases to exist as a separate entity, is called a:
C. tender offer.
Summary of California Pizza Kitchen Recapitalization
Brief history of CPK (p.3)
Reasons for CPKs success (p.3)
Ways to facilitate the success of CPK
CASE 33: CALIFORNIA PIZZA KITCHEN
California Pizza Kitchen (CPK) is a restaurants services company that operates a casual dining
chain, with a particular focus on the premium pizza segment. The company is headquartered in
Los Angeles, Califor
California Pizza Kitchen
Synopsis and Objectives
This case examines the question of financial leverage at California Pizza Kitchen (CPK) in July
2007. With a highly profitable business and an aversion to debt, CPK management is considering a
November 19th, 2009
This report seeks to answer the following five quest
December 19th, 2009
This report seeks to answer the following f
The explicit costs, such as the legal expenses, associated with corporate default are classified as
B. beta conversion
C. direct bankruptcy
D. indirect bankruptcy
The costs of avoiding a bankruptcy fili
An investment is acceptable if the profitability index (PI) of the investment is:
A. greater than one.
B. less than one.
C. greater than the internal rate of return (IRR).
D. less than the net present value (NPV).
E. greater than a pre-sp
The financial statement showing a firm's accounting value on a particular date is the:
A. income statement.
B. balance sheet.
C. statement of cash flows.
D. tax reconciliation statement.
E. shareholders' equity sheet.
A current asset i
The changes in a firm's future cash flows that are a direct consequence of accepting a project are called
D. net present value
The annual annuity stream of payments with
A warrant gives the owner:
A. the obligation to sell securities directly to the firm at a fixed price for a specified time.
B. the right to purchase securities directly from the firm at a fixed price for a specified time.
C. the obligat