Finance Exam
FINAL EXAM
1. The accounting measure of a firm's equity value generated by applying accounting principles to asset and liability acquisitions is called ________.
A. book value
2. New-economy companies generally have higher _______ than old-economy companies.
B. P/E multiples
3. Earnings yields tend to _______ when Treasury yields fall.
A. fall
4. A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information which of the following statement(s) is/are correct?
I. All else equal the firm's growth rate will accelerate after the payout change
II. All else equal the firm's stock price will go up after the payout change
III. All else equal the firm's P/E ratio will increase after the payout change
A. I only
5. An underpriced stock provides an expected return which is ____________ the required return based on the capital asset pricing model (CAPM).
C. greater than
6. One of the biggest impediments to a global capital market is _________.
B. the lack of common accounting standards
7. If the interest rate on debt is higher than the ROA, then a firm's ROE will _________.
A. decrease
8. Based on the cash flow data in the table for Interceptors Inc., which of the following statements is/are correct?
I. This firm appears to be a good investment because of its steady growth in cash.
II. This firm has only been able to generate growing cash flows by borrowing or selling equity to offset declining operating cash flows.
III. Financing activities have been increasingly important for this firm's operations, at least in the short run.
B. II and III only
9. All else the same, an ______ style option will be ______ valuable than a ______ style option.
A. American, more, European
10. An American put option gives its holder the right to _________.
C. sell the underlying asset at the exercise price on or before the expiration
1. The accounting measure of a firm's equity value generated by applying accounting principles to asset and liability acquisitions is called ________.
A. book value
2. New-economy companies generally have higher _______ than old-economy companies.
B. P/E multiples
3. Earnings yields tend to _______ when Treasury yields fall.
A. fall
4. A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information which of the following statement(s) is/are correct?
I. All else equal the firm's growth rate will accelerate after the payout change
II. All else equal the firm's stock price will go up after the payout change
III. All else equal the firm's P/E ratio will increase after the payout change
A. I only
5. An underpriced stock provides an expected return which is ____________ the required return based on the capital asset pricing model (CAPM).
C. greater than
6. One of the biggest impediments to a global capital market is _________.
B. the lack of common accounting standards
7. If the interest rate on debt is higher than the ROA, then a firm's ROE will _________.
A. decrease
8. Based on the cash flow data in the table for Interceptors Inc., which of the following statements is/are correct?
I. This firm appears to be a good investment because of its steady growth in cash.
II. This firm has only been able to generate growing cash flows by borrowing or selling equity to offset declining operating cash flows.
III. Financing activities have been increasingly important for this firm's operations, at least in the short run.
B. II and III only
9. All else the same, an ______ style option will be ______ valuable than a ______ style option.
A. American, more, European
10. An American put option gives its holder the right to _________.
C. sell the underlying asset at the exercise price on or before the expiration