Reference no: EM131427877

1. You're taking a cruise to Australia and want to have $3,000 Australian in spending money for the trip. If $1.0320 Australian buys $1 U.S. and $0.9310 Swiss francs buys $1 U.S., how many Swiss francs will you need to convert into $3,000 Australian for your trip?

A. 2,843

B. 2,706

C. 3,124

D. 2,684

2. Which one of the following is used in restructuring a firm's debt?

A. Hedging

B. Composition

C. Liquidation

D. Assignment

3. Which one of the following is a political risk to the assets and cash flows of MNCs?

A. Enactment of new taxation

B. A downturn in the economy

C. A change in the MNC's capital structure

D. Exchange rate fluctuation

4. Adam Smith attributed his belief that individuals pursuing their own economic self-interest would result in the greatest good for society over the long term to

A. economies of scale.

B. securitization.

C. the invisible hand.

D. the time value of money (TVM).

5. Why do fiduciary relationships create ethical dilemmas for financial professionals?

A. They're regulated by the government.

B. They're subject to monitoring by their firms.

C. They manage other people's money.

D. Financial management requires them to analyze investments.

6. Helping money flow from individuals who want to improve their financial future to businesses that want to expand the scale or scope of their operations relies on the successful application of

A. economies of scale.

B. financial management.

C. financial theories.

D. the time value of money (TVM).

7. Which of these is not a major trade agreement or zone?

A. Mercosur

B. International Monetary Fund (IMF)

C. Central American Fund (CAF)

D. Multinational Corporation Directive (MCD

8. What type of business organization would give your investors limited liability but you, as the owner and operator, unlimited liability?

A. Limited partnership (LP)

B. General partnership

C. Limited liability corporation (LLC)

D. Corporation

9. Using a linear probability model that uses the following formula: PD1 = 0.6 (Debt/Equity) - 0.12 (Sales/Total Assets), calculate the percentage chance of bankruptcy/default of a firm you're thinking of investing in that has a debt-to-equity ratio of 25 percent and a sales-to-assets ratio of 1.1.

A. 3.0 percent

B. 4.3 percent

C. 1.2 percent

D. 1.8 percent

10. Determine the cross rate between Australian and Canadian dollars if $1.0344 Australian will buy $1 U.S. and $0.9788 Canadian will buy $1 U.S.

A. $1.0424

B. $0.9921

C. $0.9854

D. $1.0568

11. Multinational corporations primarily invest their capital in

A. joint ventures with firms that have operations in countries where they want to do business.

B. direct ownership of assets to produce products and services in multiple countries.

C. franchising ventures in countries where they have business operations.

D. licensing agreements with firms that have products they want to offer.

12. Apogee Widgets, Inc., has filed for Chapter 7 bankruptcy. Assets available to pay off creditors after liquidation totaled $2.1 million. Administrative costs associated with the bankruptcy proceedings amounted to $40,500; wages due to 400 employees were $1 million; unpaid expenses incurred after the bankruptcy filing but before appointment of the trustee were $20,500; property taxes past due were $195,000; and unsecured creditor claims were $1.5 million. In what order and what amount should the proceeds be distributed by the trustee?

A. $195,000 for property taxes, $40,500 for administrative expenses associated with the bankruptcy proceedings, $20,500 for unpaid expenses incurred after the filing of the bankruptcy petition but before appointment of the trustee, $800,000 wages due to employees, and $1,044,000 to unsecured creditors on a prorated basis

B. $195,000 for property taxes, $40,500 for administrative expenses associated with the bankruptcy proceedings, $20,500 for unpaid expenses incurred after the filing of the bankruptcy petition but before appointment of the trustee, $1,000,000 wages due to employees, and $844,000 to unsecured creditors on a prorated basis

C. $40,500 for administrative expenses associated with the bankruptcy proceedings, $195,000 for property taxes, $20,500 for unpaid expenses incurred after the filing of the bankruptcy petition but before appointment of the trustee, $800,000 wages due to employees, and $1,044,000 to unsecured creditors on a prorated basis

D. $40,500 for administrative expenses associated with the bankruptcy proceedings, $20,500 for unpaid expenses incurred after the filing of the bankruptcy petition but before appointment of the trustee, $195,000 for property taxes, $1,000,000 wages due to employees, and $844,000 to unsecured creditors on a prorated basis

13. The practice of monitoring company managers and aligning their incentives with shareholder goals is known as

A. agency theory.

B. corporate governance.

C. fiduciary relationship.

D. financial management.

14. A prepackaged bankruptcy combines the informal workout process with

A. liquidation.

B. assignment.

C. Chapter 11 bankruptcy.

D. Chapter 7 bankruptcy.

15. _______ was/were one of the causes of the financial crisis that peaked in the fall of 2008.

A. The Sarbanes-Oxley Act

B. The American Recovery and Reinvestment Act

C. Defaults by subprime mortgage borrowers

D. Double taxation

16. What would the HHI index value be in a market where there are four firms with the following market shares:

A. 2,716

B. 2,946

C. 1,955

D. 2,288

17. The concept of interest rate parity suggests that the

A. exchange rates change over time between two countries.

B. direct quotes and cross rates differ between two countries.

C. law of one price is valid between two countries.

D. differences in interest rate, forward currency, and spot currency between two countries are equal.

18. Tax _______ is commonly a tax consideration motivating a merger.

A. gains from increased operating income

B. losses from surplus funds

C. gains from paying down debt

D. gains from unused debt capacity

19. Your company has invested $540,000 U.S. in purchasing real estate in Argentina. The peso exchange rate at the time of the transaction was 1 peso = $0.2484. If the Argentinean peso is subsequently devalued to $0.2186, what would be the loss in U.S. dollars because of currency fluctuation?

A. $64,783.19

B. $72,831.24

C. $102,824.72

D. $59,243.12

20. Calculate the change in HHI following a merger between firm B and firm D in an industry with the following market share levels:

A. 498

B. 721

C. 685

D. 814

21-To minimize the burden of paying stable dividends, what two classes do some firms divide dividends into?

A. Extraordinary and residual

B. Ordinary and extraordinary

C. Special and ordinary

D. Residual and specia

22-Which one of the following is not a capital-budgeting technique?

A. Net present value (NPV)

B. Modified internal rate of return (MIRR)

C. payback(Pb)

D. Modified payback (MPB)

23.The net cash flow from a firm in February, March, and April is $4.6 million, -$1.7 million, and $1.9 million, respectively. What's the cumulative cash flow for April?

A. $4.8 million

B. $5.1 million

C. $3.9 million

D. $6.9 million

24. In Baumol's model, what's the assumed starting level for cash?

A. Replenishment

B. Safety stock

C. Compensating balance

D. Net present value

25.A firm has the following sales figures:

• Year 2011: $2.1 million

• Year 2012: $2.3 million

• Year 2013: $2.5 million

• Year 2014 $2.2 million

• Year 2015: $3.1 million

What would the forecast for next year's sales be using the naïve approach?

A. $3.4 million

B. $3.2 million

C. $2.5 million

D. $3.1 million

26. Suppose a firm pays total dividends of $1,240,000 out of a net income of $8 million. What would the firm's payout ratio be?

A. 18.3 percent

B. 14.6 percent

C. 15.5 percent

D. 12.5 percent

27.A common criticism of the payback (PB) benchmark is that it doesn't

A. take into account NPV.

B. receive complementing information from discount payback (DPB).

C. consider a project's IRR.

D. account for the time value of money(TVM)

28. Suppose Super Fun Toys, Inc., has sales of $8.9 million for the year just ended, the profit margin of the firm is 16 percent with a retention rate of 28 percent, and the firm expects sales of $9.8 million next year. If all assets and current liabilities are expected to grow with sales, what amount of additional funds will Super Fun Toys need from external sources to fund the expected growth?

A. $187,925

B. $552,800

C. $689,500

D. $368,484

29. A graph of a project's NPV as a function of possible capital costs is called the _______ profile.

A. NPV

B. IRR

C. standard deviation

D. beta

30. What's the appropriate tax rate to be used in WACC?

A. The simple average of the tax rates that would have been paid on the taxable income shielded by the interest deduction

B. The weighted average of the firm's discounted current marginal tax rates

C. The highest applicable tax rate charged on the firm's income

D. The weighted average of the marginal tax rates that would have been paid on the taxable income shielded by the interest deduction.