1. A takeover tender offer lets a company attempt to acquire a target firm again

Question

1. A takeover tender offer lets a company attempt to acquire a target firm against its will. (Points : 4)        True
       False Question 2.2. Existing management of a firm is almost always ready to accept an offer for the purchase of the firm at a price above the market. (Points : 4)        True
       False Question 3.3. When a company defaults on a secured debt, it is rare for the secured asset to be sold and the proceeds distributed to the debtor. (Points : 4)        True
       False Question 4.4. Debentures are commonly issued by small companies. (Points : 4)        True
       False Question 5.5. Households and the government are mainly considered to be suppliers of funds while corporations are generally considered users of funds. (Points : 4)        True
       False Question 6.6. Financial intermediaries channel funds into the capital markets from the household sector. (Points : 4)        True
       False Question 7.7. The highest supplier of funds to the U.S. credit markets were foreign investors. (Points : 4)        True
       False Question 8.8. The major suppliers of funds to the U.S. credit markets were foreign suppliers, mutual funds, and federal, state and local governments. (Points : 4)        True
       False Question 9.9. If a company has promised to pay interest on debt, it must pay the interest even if it shows no profit for the year, or else it may go bankrupt. (Points : 4)        True
       False Question 10.10. For mergers occurring after 2001, goodwill must be amortized over 40 years or less. (Points : 4)        True
       False Question 11.11. If you invest $8,000 at 12% interest, how much will you have in 7 years? (Points : 4)        $17,685
       $16, 586
       $16,000
       $19,000 Question 12.12. Which of the following is not a step in creating the net present value profile? (Points : 4)        Determining the net present value at a zero discount rate.
       Determining the net present value at a normal discount rate.
       Determining the project's internal rate of return.
       

Determining the payback for the project. Question 13.13. When Country A's currency strengthens against Country B's, citizens of Country A will (Points : 4)        pay less to buy Country B's products.
       pay more to buy Country B's products.
       pay more to buy domestically produced products.
       not be affected by the change in their currency's value. Question 14.14. Allen Lumber Company had earnings after taxes of $580,000 in the year 2006 with 400,000 shares outstanding on December 31, 2010. On January 1, 2011, the firm issued 35,000 new shares. Because of the proceeds from these new shares and other operating improvements, 2011 earnings after taxes were 25 percent higher than in 2010. Earnings per share for the year-end 2011 was (Points : 4)        $1.67
       $1.45
       $1.59
       $1.29 Question 15.15. A firm will usually increase the ratio of short-term debt to long-term debt when (Points : 4)        short-term debt has a lower cost than long-term equity.
       the term structure is inverted and expected to shift down.
       the term structure is upward sloping and expected to shift up.
       the firm is undertaking a large capital budgeting project Question 16.16. Which of the following financial assets is likely to have the highest required rate of return based on risk? (Points : 4)        Corporate bond.
       Treasury bill.
       Certificate of Deposit.
       Common stock Question 17.17. The market allocates capital to firms based on all of the following except: (Points : 4)        Higher risk requires lower returns due to higher expectations
       Level of efficiency
       Expected returns
       Degree of past performance Question 18.18. If a Czech crown is equal to $.04, the U.S. dollar is equal to how many Czech crowns? (Points : 4)        0.40
       400
       25.00
       15 Question 19.19. As Exchange rates change, they (Points : 4)        change the relative purchasing power between countries.
       can affect imports and exports between those two countries.
       will affect the flow of funds between the countries.
       all of these are true. Question 20.20. A firm has $1,000,000 in its common stock account and $2,500,000 in its paid-in capital account. The firm issued 100,000 shares of common stock. What was the original issue price if only one stock issue has ever been sold? (Points : 4)        $35 per share
       $25 per share
       $10 per share
       Not enough information to tell Question 21.21. A firm has current assets of $75,000 and total assets of $375,000. The firm's sales are $900,000. The firm's fixed asset turnover is (Points : 4)        3.0x
       12.0x
       2.4x
       5.0x Question 22.22. The need for an increase or decrease in short-term borrowing can be predicted by (Points : 4)        ratio analysis.
       trend analysis.
       a cash budget.
       an income statement. Question 23.23. International cash management systems are more complex than domestic cash management systems because (Points : 4)        many developing countries still use a cash payments system.
       some countries rely on electronic funds transfer more than the U.S.
       liquidity management, involving short-term cash balances and deficits, has to be managed across international boundaries and time zones and is subject to the risks of currency fluctuations.
       none of these. Question 24.24. Kenneth's Arrows and Bows borrow $10,000 for one year at 12 percent interest. What is the effective rate of interest if the loan is discounted? (Points : 4)        Less than 12.5 percent
       More than 12.9 percent, but less than 13.5 percent
       More than 12.5 percent, but less than 13.0 percent
       More than 14.5 percent Question 25.25. A firm is selling an old asset below book value in a replacement decision. As the firm's tax rate is raised, the net cash outflow (purchase price less proceeds from the sale of the old asset) would: (Points : 4)        go up.
       go down.
       remain the same.
       more information required. 1. A takeover tender offer lets a company attempt to acquire a target firm against its will. (Points : 4)        True
       False

Explanation / Answer

1. True

2. False

3. False

4. False

5. False

6. True

7. False

8. False

9. True

10. False

11. $17,685

12. Determing the payback for the project

13. pay less to buy Company's B's project

14. $1.67

15. the term structure is inverted and expected to shift down

16. Common stock

17. Higher risk requires lower returns due to higher expectations

18. 25.00

19. all of these are true

20. $35 per share

21. 3.0X

22. a cash budget

23. liquidity management, involving short-term cash balances and deficits, has to be managed across international boundaries and time zones and is subject to the risks of currency fluctuations

24. More than 12.5 percent, but less than 13.0 percent

25. go down

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