Corporate Finance Exam with Answers Posted on May 10‚ 2012 by Sam Corporate Finance‚ Chapters 8‚ 9 & 10. Exam Questions: 1. A project’s opportunity cost of capital is: A. The forgone return from investing in the project. 2. Which of the following statements is correct for a project with a positive NPV? A. The IRR must be greater than 1. 3. What is the NPV of a project that costs $100‚000 and returns $50‚000 annually for 3 years if the opportunity cost of capital is 14%? C. $16‚085
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CHAPTER 6 NET PRESENT VALUE AND OTHER INVESTMENT CRITERIA Answers to Concepts Review and Critical Thinking Questions 1. Assuming conventional cash flows‚ a payback period less than the project’s life means that the NPV is positive for a zero discount rate‚ but nothing more definitive can be said. For discount rates greater than zero‚ the payback period will still be less than the project’s life‚ but the NPV may be positive‚ zero‚ or negative‚ depending on whether the discount rate is less than
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answer to explain the U.S. financial system to DellaTorre. a. Why is corporate finance important to all managers? Corporate Finance is important to all managers because they are the ones who have to determine‚ assess‚ and mitigate/prevent risks that are financial in nature to the business. Every decision they make is affected by their ability to translate financial calculations into risks for the company. Without corporate finance‚ those managers will not be able to assist the company in garnering
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The University for business and the professions MSc Degree in Shipping‚ Trade and Finance MSc Degree in Supply Chain‚ Trade and Finance MSc Degree in Energy‚ Trade and Finance Cass Business School Module Code SMM586 Exam title Corporate Finance Full/Part time Date 1st May 2013 Time 10.00 -13.00 Division of Marks: Section A carries 36 marks‚ Section B carries 28 marks and Section C carries 36 marks. Instructions to students: Students should answer TWO questions
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CORPORATE FINANCE Master in Banking and Finance 2012 FINAL EXAM A. PROBLEMS (20 points each problem) 1. FAGE Manufacturing is currently an all-equity firm with 20 million shares outstanding and a stock price of $7.50 per share. Although investors currently expect FAGE to remain an all-equity firm‚ the company plans to announce that it will borrow $50 million and use the funds to repurchase shares. FAGE will pay interest only on this debt‚ and it has no further plans to increase or decrease
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Corporate finance: Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize corporate value while managing the firm’s financial risks. Although it is in principle different from managerial finance which studies the financial decisions of all firms‚ rather than corporations alone‚ the main concepts in the study of corporate finance
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because there is no possibility of default‚ the risk of the firm’s equity does not change. Therefore‚ risk-free debt allows the firm to get the benefit of a low cost of capital of debt without raising its cost of capital of equity.” (3 points) Solution to Part I What is important? Perfect capital market‚ no taxes; M&M propositions apply here; total market value of GP is 300 m composed of 200 m equity and 100 m debt; the expected return on equity is 15% and the market value weight of equity is
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Chapter 1 Note: the summaries at the end of each chapter are good study tools. Corporations A corporation is a permanent entity‚ legally distinct from its owners‚ who are called shareholders or stockholders. A corporation confers limited liability to its owners: shareholders cannot be held personally responsible for the corporations’ debts; they only stand to lose their investment. To incorporate‚ you work with a lawyer to prepare articles of incorporation‚ which set out the purpose of the
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Chapter 9. Risk and resturn: lessons from market history Two forms of return on investment in shares: 1. Dividend. When a company is profitable‚ some of the profit is divided amongst the shareholders. This part is the income component of your return. 2. Capital gain/loss. This is the initial worth of the equity minus the end-of-year worth of the equity. This is the second component of your return.(also reffered to a negativ/positive CG) The total monetary return is the sum of the
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Corporate Finance Efficient Market Hypothesis Report Table of Content I. Introduction Page 3 II. Weak efficiency form Page 3-4 III. Semi-strong efficiency form Page 4-5 IV. Strong efficiency form Page 5-6 V. Implications of the efficient market hypothesis for investors Page 6 VI. Conclusion Page 6 VII. Bibliography Page7 I. Introduction In the book Corporate finance by Denzil Watson and Antony Head (2001)‚ Watson et al refers to a work by Dixon and Holmes (1992) which
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