Masters Finance midterm need today (timed 1:30 minutes to complete

Hello! I need help completing a timed midterm. It’s times as soon as I send the file. It includes items such as:

 

1) present values

2) valuing bonds

3) stocks

4) net present value

5) risk and return

6) net present value rule

7) risk and cost of capital

 

Some answers require calculations and others just need answers to the questions.

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A. I only

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Question 1 of 25

4.0 Points

Briefly explain the functions of financial markets.

Question 2 of 25 4.0 Points

For example, in the case of an electric car project, which of the following cash flows should be treated as incremental flows when deciding whether to go ahead with the project?

A. The cost of research and development undertaken for developing the electric car in the past three years

B. The annual depreciation charge

C. Tax savings resulting from the depreciation charges

D. Dividend payments

Question 3 of 25 4.0 Points

The cost of capital for a project depends on:

A. The company’s cost of capital

B. The use to which the capital is put, i.e. the project

C. The industry cost of capital

D. All of the above

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Question 4 of 25 4.0 Points

The distribution of returns, measured over a short interval of time, like daily returns, can be approximated by:

A. Normal distribution

B. Lognormal distribution

C. Binomial distribution

D. none of the above

Question 5 of 25 4.0 Points

The unique risk is also called the:

A. Unsystematic risk

B. Diversifiable risk

C. Firm specific risk

Question 6 of 25 4.0 Points

The following entities issue bonds to raise long-term loans except:

A. The federal government

B. State and local governments

C. Companies

D. Individuals

Question 7 of 25 4.0 Points

A firm’s investment decision is also called the:

A. Financing decision

B. Liquidity decision

C. Capital budgeting decision

D. None of the above

Question 8 of 25 4.0 Points

A firm’s capital investment proposals should reflect:

I) Capital budgeting process

II) Strategic planning process

III) Middle managers’ ideas and views

A. I only

B. I and II only

C. I, II, and III

D. III only

Question 9 of 25 4.0 Points

Company X has a P/E ratio of 10 and a stock price of $50 per share. Calculate earnings per share of the company.

A. $6 per share

B. $10 per share

C. $0.20 per share

D. $5 per share

Question 10 of 25 4.0 Points

The market value of Cable Company’s equity is $60 million, and the market value of its risk-free debt is $40 million. If the required rate of return on the equity is 15% and that on the debt is 5%, calculate the company’s cost of capital. (Assume no taxes.)

A. 15%

B. 10%

C. 11%

Question 11 of 25 4.0 Points

The managers of a firm can maximize stockholder wealth by:

A. Taking all projects with positive NPVs

B. Taking all projects with NPVs greater than the cost of investment

C. Taking all projects with NPVs greater than present value of cash flow

Question 12 of 25 4.0 Points

Spill Oil Company’s stocks had -8%, 11% and 24% rates of return during the last three years respectively; calculate the average rate of return for the stock.

A. 8% per year

B. 9% per year

C. 11% per year

Question 13 of 25 4.0 Points

State the “rate of return rule.”

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Question 14 of 25 4.0 Points

Using the company cost of capital to evaluate a project is:

I) Always correct

II) Always incorrect

III) Correct for projects that are about as risky as the average of the firm’s other assets

B. II only

C. III only

D. I and III only

Question 15 of 25 4.0 Points

The security market line (SML) is the graph of:

A. Expected rate on investment (Y-axis) vs. variance of return

B. Expected return on investment vs. standard deviation of return

C. Expected rate of return on investment vs. beta

D. A and B

Question 16 of 25 4.0 Points

Net Working Capital should be considered in project cash flows because:

A. Firms must invest cash in short-term assets to produce finished goods

B. They are sunk costs

C. Firms need positive NPV projects for investment

Question 17 of 25 4.0 Points

Briefly explain the difference between company and project cost of capital.

Question 18 of 25 4.0 Points

Stock A has an expected return of 10% per year and stock B has an expected return of 20%. If 40% of the funds are invested in stock A, and the rest in stock B, what is the expected return on the portfolio of stock A and stock B?

A. 10%

B. 20%

C. 16%

Question 19 of 25 4.0 Points

Major disadvantages of the Sarbanes-Oxley Act of 2002 (SOX) are the following except:

A. good investor protection

B. increase in compliance costs

C. that it constrains managers’ ability to run the firm

D. that it may discourage development of human capital in the firm

Question 20 of 25 4.0 Points

Discuss the general principle in the valuation of a common stock.

Question 21 of 25 4.0 Points

If the Wall Street Journal Quotation for a company has the following values close: 55.14; Net chg: = + 1.04; then the closing price for the stock for the previous trading day was?

A. $56.18

B. $54.10

C. $55.66

D. None of the above.

Question 22 of 25 4.0 Points

As a legal entity a corporation can perform the following functions except: I) borrow money; II) lend money; III) sue and be sued; IV) vote

A. I and II only

B. I, II, and III only

C. IV only

D. I, II, III and IV

Question 23 of 25 4.0 Points

Which of the following stocks is/are a growth stock(s)?

A. Unilever

B. Cummins, Inc

C. Starbucks

D. All of the above are growth stocks

Question 24 of 25 4.0 Points

The mixture of debt and equity, used to finance a corporation is also known as:

A. Capital budgeting

B. Capital structure

C. Investing

D. Treasury

Question 25 of 25 4.0 Points

According to the net present value rule, an investment in a project should be made if the:

A. Net present value is greater than the cost of investment

B. Net present value is greater than the present value of cash flows

C. Net present value is positive

D. Net present value is negative

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