FIN 571 LATEST VERSION FINALS

1. The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as _____ costs

2. Which one of the following is an example of a nondiversifiable risk

3. A project has an initial cost of $2,250. The cash inflows are $0, $500, $900, and $700 for Years 1 to 4, respectively. What is the payback period

4. Futures contracts contrast with forward contracts by

5. An efficient capital market is one in which

6. Ratios that measure a firm’s ability to pay its bills over the short run without undue stress are known as

7. A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every

8. The primary goal of financial management is to

9. Book value

10. The underlying assumption of the dividend growth model is that a stock is worth

11. You plan to invest $6,500 for three years at 4 percent simple interest. What will your investment be worth at the end of the three years

12. What is the present value of $6,811 to be received in one year if the discount rate is 6.5 percent

13. The process of planning and managing a firm’s long-term assets is called

14. The discount rate that makes the net present value of an investment exactly equal to zero is called the

15. Lois is purchasing an annuity that will pay $5,000 annually for 20 years, with the first annuity payment made on the date of purchase. What is the value of the annuity on the purchase date given a discount rate of 7 percent

16. Which one of these is a correct definition

17. One disadvantage of the corporate form of business ownership is the

18. An interest rate that is compounded monthly, but is expressed as if the rate were compounded annually, is called the _____ rate

19. All else equal, the contribution margin must increase as

20. All else held constant, interest rate risk will increase when the time to maturity

21. A firm has a debt-equity ratio of .64, a pretax cost of debt of 8.5 percent, and a required return on assets of 12.6 percent. What is the cost of equity if you ignore taxes

22. The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the

23. Which one of these statements is correct concerning the cash cycle

24. Under the _______ method, the underwriter buys the securities for less than the offering price and accepts the risk of not selling the issue, while under the _______ method, the underwriter does not purchase the shares but merely acts as an agent

25. Which term defines the tax rate that applies to the next dollar of taxable income earned

26. The higher the inventory turnover, the

27. The cash flow resulting from a firm’s ongoing, normal business activities is referred to as the

28. Which one of the following statements is false

29. Which one of the following statements about preferred stock is true

30. The market price of a bond increases when the

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