FIN 534 FIN534 Financial Management Final Exam Part 2 Answers (2017)

FIN 534 FIN534 Financial Management Final Exam Part 2 Answers (2017)

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FIN 534 Financial Management Final Exam Part 2 Answers (2017)

  1. Which of the following is NOT normally regarded as being a good reason to establish an ESOP?
  2. Which of the following is NOT normally regarded as being a barrier to hostile takeovers?

  3. Which of the following statements is correct?

  4. Poff Industries' stock currently sells for $120 a share. You own 100 shares of the stock. The company is contemplating a 2-for-1 stock split. Which of the following best describes what your position will be after such a split takes place?

  5. Rohter Galeano Inc. is considering how to set its dividend policy. It has a capital budget of $3,000,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company forecasts that its net income this year will be $3,500,000. If the company follows a residual dividend policy, what will be its total dividend payment?

  6. Which of the following statements is correct?

  7. Which of the following statements is correct?

  8. If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that

  9. Which of the following actions will best enable a company to raise additional equity capital?

  10. Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?

  11. Which of the following statements best describes the optimal capital structure? The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's ____.

  12. Other things held constant, which of the following events is most likely to encourage a firm to increase the amount of debt in its capital structure?

  13. Which of the following statements is CORRECT?

  14. Which of the following statements is CORRECT?

  15. Which of these items will not generally be affected by an increase in the debt ratio?

  16. Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant?

  17. Firms generally choose to finance temporary current operating assets with short-term debt because

  18. Which of the following items should a company report directly in its monthly cash budget?

  19. Which of the following statements is most consistent with efficient inventory management? The firm has a

  20. Which of the following is NOT commonly regarded as being a credit policy variable?

  21. Which of the following is NOT directly reflected in the cash budget of a firm that is in the zero tax bracket?

  22. Other things held constant, which of the following would tend to reduce the cash conversion cycle?

  23. Suppose a foreign investor who holds tax-exempt Eurobonds paying 9% is considering investing in an equivalent-risk domestic bond in a country with a 28% withholding tax on interest paid to foreigners. If 9% after-tax is the investor's required return, what before-tax rate would the domestic bond need to pay to provide the required after-tax return?

  24. Which of the following is NOT a reason why companies move into international operations?

  25. If it takes $0.71 U.S. dollars to purchase one Swiss franc, how many Swiss francs can one U.S. dollar buy?

  26. Suppose it takes 1.82 U.S. dollars today to purchase one British pound in the foreign exchange market, and currency forecasters predict that the U.S. dollar will depreciate by 12.0% against the pound over the next 30 days. How many dollars will a pound buy in 30 days?

  27. If 1.64 Canadian dollars can purchase one U.S. dollar, how many U.S. dollars can you purchase for one Canadian dollar?

  28. Suppose 1 U.S. dollar equals 1.60 Canadian dollars in the spot market. 6-month Canadian securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). 6-month U.S. securities have an annualized return of 6.5% and a periodic return of 3.25%. If interest rate parity holds, what is the U.S. dollar-Canadian dollar exchange rate in the 180-day forward market?

  29. A box of chocolate candy costs 28.80 Swiss francs in Switzerland and $20 in the United States. Assuming that purchasing power parity (PPP) holds, what is the current exchange rate?

  30. Suppose one U.S. dollar can purchase 144 yen today in the foreign exchange market. If the yen depreciates by 8.0% tomorrow, how many yen could one U.S. dollar buy tomorrow?


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