Corporate Finance
Exam Questions
Course Introduction
Corporate Finance explores the fundamental principles and practices used in financial decision-making within corporations. The course covers topics such as time value of money, capital budgeting, risk and return, cost of capital, capital structure, dividend policy, and working capital management. Students learn how financial managers analyze investment opportunities, determine financing sources, and maximize firm value while considering market and economic factors. Through case studies and practical examples, participants develop skills to apply financial concepts to real-world corporate scenarios.
Recommended Textbook
Finance Applications and Theory 4th Edition by Marcia Cornett
Available Study Resources on Quizplus
20 Chapters
2227 Verified Questions
2227 Flashcards
Source URL: https://quizplus.com/study-set/2860
Page 2
Chapter 1: Introduction to Financial Management
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/57017
Sample Questions
Q1) An angel investor differs from a venture capitalist because of the A)type of investment.
B)investment time frame.
C)size of investment.
D)voting rights.
Answer: C
Q2) The increase in oil production in the United States characterizes which of the following key financial concepts presented in this book?
A)the Rule of 72
B)time value of money
C)risk and return
D)capital budgeting
Answer: D
Q3) The most common type of business in the United States is the A)corporation.
B)partnership.
C)sole proprietorship.
D)hybrid organization such as a limited liability company.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Reviewing Financial Statements
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/57016
Sample Questions
Q1) Café Creations Inc. has net cash flow from financing activities for the last year of $25 million. The company paid $15 million in dividends last year. During the year, the change in notes payable on the balance sheet was a decrease of $40 million, and change in common and preferred stock was an increase of $50 million. The end of year balance for long-term debt was $40 million. What was their beginning of year balance for long-term debt?
A)$10 million
B)$20 million
C)$30 million
D)$40 million
Answer: A
Q2) For which of the following would one expect the book value of the asset to differ widely from its market value?
A)accounts receivable
B)accounts payable
C)notes payable
D)equity
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Analyzing Financial Statements
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/57015
Sample Questions
Q1) Green Products, Inc. has current liabilities = $40 million, current ratio = 2.4 times, inventory turnover ratio = 8 times, average collection period = 40 days, and sales = $320 million. What is the value of their cash and marketable securities?
A)$20.93m.
B)$56.00m.
C)$75.07m.
D)$96.00m.Current ratio = 2.4 times =
Answer: A
Q2) Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities?
A)cross-section
B)current
C)internal-growth
D)quick or acid-test
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Time Value of Money 1: Analyzing Single Cash Flows
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/57018
Sample Questions
Q1) What is the value in year 4 of a $9,000 cash flow made in year 13 if interest rates are 7 percent in years "4 through 9" and increase to 11 percent after that?
A) $4,226.99
B) $4,472.06
C) $4,698.17
D) $4,716.52
Q2) Which of the following is NOT true when developing a time line?
A) Cash inflows are designated with a positive number.
B) Cash outflows are designated with a positive number.
C) The cost is known as the interest rate.
D) The time line shows the magnitude of cash flows at different points in time.
Q3) A firm's net income last year was $2.65 million. Its net income grew 8 percent during the last "5" years. If that growth rate continues, how long will it take for the firm's net income to double?
A) 6.6 years
B) 7.1 years
C) 8.2 years
D) 9 years
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Time Value of Money 2: Analyzing Annuity Cash
Flows
Available Study Resources on Quizplus for this Chatper
152 Verified Questions
152 Flashcards
Source URL: https://quizplus.com/quiz/57014
Sample Questions
Q1) When you get your credit card bill, it will offer a minimum payment, which A)usually only pays the accrued interest and a small amount of principal.
B)usually only pays the principal and a small amount of accrued interest.
C)usually only pays the principal and no accrued interest. D)usually only pays the accrued interest and no principal.
Q2) You have reviewed your budget and determine that the most you can afford on a car loan is $375 per month. What is the most you can borrow if interest rates are 8 percent and you can pay the loan over five years?
A)$20,591.86
B)$16,779.02
C)$18,494.41
D)$21,147.83
Q3) If you start making $100 monthly contributions today and continue them for five years, what is their future value if the compounding rate is 10 percent APR? What is the present value of this annuity?
A)$508.14, $487.74
B)$512.64, $491.80
C)$7,743.71, $4,706.53
D)$7,808.24, $4,745.78
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Understanding Financial Markets and Institutions
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/57013
Sample Questions
Q1) Which of the following occurs as domestic economic conditions experience a period of growth especially relative to other countries?
A)Market participants are willing to borrow more heavily.
B)At every interest rate the supply of loanable funds increases.
C)At every interest rate the demand for loanable funds increases.
D)All of these choices are correct.
Q2) The Wall Street Journal states that the yield curve for Treasuries is downward sloping and there is no liquidity premium or maturity risk premium. Given this information, which of the following statements is correct?
A)A 30-year corporate bond must have a higher yield than a five-year corporate bond.
B)A five-year corporate bond must have a higher yield than a 30-year Treasury bond.
C)A five-year Treasury bond must have a higher yield than a five-year corporate bond.
D)All of these choices are correct.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Valuing Bonds
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/57012
Sample Questions
Q1) A 4.25 percent coupon bond with eight years left to maturity is offered for sale at $983.36. What yield to maturity is the bond offering? (Assume interest payments are paid semiannually and par value is $1,000.)
A)2.25 percent
B)2.36 percent
C)4.25 percent
D)4.50 percent
Q2) A bond's current yield is defined as
A)the bond's annual coupon rate divided by the bond's par value.
B)the bond's annual coupon rate divided by the market interest rate.
C)the bond's annual coupon rate divided by the bond's current market price.
D)the bond's annual coupon rate divided by the bond's original issue price.
Q3) What's the current yield of a 6 percent coupon corporate bond quoted at a price of 101.70?
A)5.9 percent
B)6.0 percent
C)6.1 percent
D)10.2 percent
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Valuing Stocks
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/57011
Sample Questions
Q1) A firm recently paid a $1.00 annual dividend. The dividend is expected to increase by 10 percent in each of the next four years. In the fourth year, the stock price is expected to be $100. If the required rate for this stock is 14 percent, what is its value?
A)$25.00
B)$36.60
C)$62.87
D)$72.30
Q2) Home Depot (HD) recently paid a $0.90 dividend. The dividend is expected to grow at a 17 percent rate. At the current stock price of $33.08, what is the return shareholders are expecting?
A)2.70 percent
B)17.03 percent
C)17.18 percent
D)20.18 percent
Q3) Why is the ask price higher than the bid price?
A)It represents the gain a market maker achieves.
B)It represents the gain the stock seller achieves.
C)It represents the gain the stock buy achieves.
D)It represents the gain all participants will achieve.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Characterizing Risk and Return
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/57010
Sample Questions
Q1) Which of these is a measure summarizing the overall past performance of an investment?
A)average return
B)dollar return
C)market return
D)percentage return
Q2) You have $15,040 to invest. You want to purchase shares of Company Air at $42.50, Company B at $51.50, and Company F at $9.75. How many shares of each company should you purchase so that your portfolio consists of 20 percent Company A, 40 percent Company B, and 40 percent Company F? Report only whole stock shares.
A)Company A = 20 shares, Company B = 40 shares, Company F = 40 shares
B)Company A = 85 shares, Company B = 21shares, Company F = 39 shares
C)Company A = 71 shares, Company B = 117 shares, Company F = 617 shares
D)Company A = 353 shares, Company B = 291 shares, Company F = 1538 shares
Q3) Which statement is true?
A)The larger the standard deviation, the lower the total risk.
B)The larger the standard deviation, the higher the total risk.
C)The larger the standard deviation, the more portfolio risk.
D)The standard deviation is not an indication of total risk.
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Estimating Risk and Return
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/57009
Sample Questions
Q1) You have a portfolio with a beta of 1.25. What will be the new portfolio beta if you keep 80 percent of your money in the old portfolio and 20 percent in a stock with a beta of 1.75?
A)1.00
B)1.35
C)1.50
D)3.00
Q2) Which of these is the measurement of risk for a collection of stocks for an investor?
A)beta
B)efficient market
C)expected return
D)portfolio beta
Q3) Which of the following is data that includes past stock prices and volume, financial statements, corporate news, analyst opinions, etc.?
A)audited financial statements
B)generally accepted accounting principles
C)privately held information
D)public information
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Calculating the Cost of Capital
Available Study Resources on Quizplus for this Chatper
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/57008
Sample Questions
Q1) Which of the following is a true statement regarding the appropriate tax rate to be used in the WACC?
A)One would use the marginal tax rate that the firm paid the prior year.
B)One would use the average tax rate that the firm paid the prior year.
C)One would use the weighted average of the marginal tax rates that would have been paid on the taxable income shielded by the interest deduction.
D)One would use the marginal tax rates that would have been paid on the taxable income shielded by the interest deduction.
Q2) Solar Shades has 8 million shares of common stock outstanding, 4 million shares of preferred stock outstanding, and 10 thousand bonds. If the common shares are selling for $13 per share, the preferred shares are selling for $30 per share, and the bonds are selling for 105 percent of par, what would be the weight used for equity in the computation of Solar Shades' WACC?
A)33.33 percent
B)44.35 percent
C)46.42 percent
D)66.61 percent
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Estimating Cash Flows on Capital Budgeting Projects
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/57007
Sample Questions
Q1) The best approach to convert an infinite series of asset purchases into a perpetuity is known as the:
A)net working capital approach
B)net present value approach
C)equivalent annual cost approach
D)equivalent annual cash flow approach
Q2) You are evaluating two different machines. Machine A costs $25,000, has a five-year life, and has an annual OCF (after tax) of -$6,000 per year. Machine B costs $30,000, has a seven-year life, and has an annual OCF (after tax) of -$5,500 per year. If your discount rate is 10 percent, using EAC which machine would you choose?
A)Machine A
B)Machine B
C)Both machines A and B
D)Neither machine A nor B
Q3) With regard to depreciation, the time value of money concept tells us that:
A)delaying the depreciation expense is always better.
B)taking the depreciation expense sooner is always better.
C)delaying the depreciation expense is sometimes better.
D)taking the depreciation expense sooner is sometimes better.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Weighing Net Present Value and Other Capital
Budgeting Criteria
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/57006
Sample Questions
Q1) Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.
\[\begin{array} { | l | c | c | c | c | c | c | c | }
\hline \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\
\hline \text { Cash flow: } & - 250 & 75 & 0 & 100 & 75 & 50 \\
\hline
\end{array}\]
A)(-0.0977 percent, reject)
B)(-9.77 percent, reject)
C)(-24.41 percent, reject)
D)24.41 percent, accept
Q2) A decision rule and associated methodology for converting the NPV statistic into a rate-based metric is referred to as:
A)NPV.
B)profitability index.
C)MIRR.
D)discounted payback.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Working Capital Management and Policies
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/57005
Sample Questions
Q1) Scribble, Inc. has sales of $100,000 and cost of goods sold of $75,000. The firm had a beginning inventory of $20,000 and an ending inventory of $22,000. What is the length of the days' sales in inventory?
A)73.00 days
B)83.30 days
C)97.34 days
D)107.07 days
Q2) Which of the following describes the place over which the bank-to-bank transfers are conducted within the United States?
A)Lockbox system
B)Concentration banking
C)Wire transfers
D)Fedwire
Q3) If a firm has a cash cycle of 25 days and an operating cycle of 80 days, what is its payables turnover?
A)14.6
B)4.56
C)6.64
D)55
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Financial Planning and Forecasting
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/57004
Sample Questions
Q1) Which of the following defines MAPE?
A)Median absolute percentage error, a measure of a financial statement's accuracy
B)Median absolute percentage error, a measure of a forecast's accuracy
C)Mean absolute percentage error, a measurement of a forecast's accuracy
D)Mean absolute percentage error, a measure of a financial statement's accuracy
Q2) Which of the following is likely to increase the firm's additional funds needed?
A)The firm cuts its dividend by 50 percent.
B)The firm reduces its usage of trade credit.
C)The firm has unused fixed assets.
D)All of the options would increase the firm's additional funds needed.
Q3) Silly Putty Inc. has had sales of $10 million, $15 million, and $8 million for each of the last three years. What would be the MAPE if the actual sales were $12 million using the average approach?
A)11.00 percent
B)20.00 percent
C)26.67 percent
D)33.33 percent
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Assessing Long-Term Debt, Equity, and Capital Structure
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/57003
Sample Questions
Q1) An all-equity financed firm has $45,000 in assets and the stock price is $10. If the firm restructures with 30 percent debt which creates interest expense of $810 per year and the firm's tax rate is 28 percent, what is the break-even EBIT?
A)$1967
B)$1157
C)$2700
D)$1500
Q2) Which of the following statements is correct?
A)The effect of increasing a firm's use of financial leverage is to decrease the volatility of the firm's earnings.
B)The effect of increasing a firm's use of financial leverage could be either to increase or decrease the volatility of the firm's earnings depending on how much leverage is utilized.
C)The effect of increasing a firm's use of financial leverage is to increase the volatility of the firm's earnings.
D)None of the statements are correct.
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Sharing Firm Wealth: Dividends, Share
Repurchases, and Other Payouts
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/57002
Sample Questions
Q1) If a firm has retained earnings of $20 million, a common shares account of $25 million, and additional paid-in-capital of $15 million, how much would be transferred in (or out) of these accounts in response to a 15 percent stock dividend, respectively?
A)- 15 percent, 0 percent, + 15 percent
B)- 15 percent, + 15 percent, 0 percent
C)- 30 percent, + 15 percent, + 15 percent
D)-30 percent, + 30 percent, + 30 percent
Q2) Cups N Saucers, Inc. normally pays a quarterly dividend. The last such dividend paid was $1.00, all future quarterly dividends are expected to grow at 7 percent, and the firm faces a required rate of return on equity of 15 percent. If the firm just announced that the next dividend will be an extraordinary dividend of $3.00 per share that is not expected to affect any other future dividends, what should the stock price be?
A)$12.00
B)$13.38
C)$14.18
D)$15.05
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Issuing Capital and the Investment Banking Process
Available Study Resources on Quizplus for this Chatper
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/57001
Sample Questions
Q1) A syndicate is:
A)a small group of institutional investors.
B)several investment banks working together to sell and distribute a new security issue.
C)several banks working together to lend a company money for a project or expansion.
D)a group of equity investors that infuse distressed firms with major amounts of capital.
Q2) Which of these is the type of loan where the firm borrows against pre-negotiated lines of credit or loan commitments?
A)Loan commitment agreements
B)Spot loans
C)Take-down loans
D)Back-end loans
Q3) The rate on commercial paper is generally higher than the prime rate. True or false?
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: International Corporate Finance
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/57000
Sample Questions
Q1) Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875
A)287,500 ringget
B)1,287,500 ringget
C)3,478,260.87 ringget
D)4,478,300 ringget
Q2) If the spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.5215, and if the interest rate in the United States is 8 percent and in New Zealand is 4 percent, then what should be the three-month forward exchange rate?
A)$0.6637
B)$0.6572
C)$0.6825
D)$0.6329
Q3) When Starbucks opens a location in Mexico City, this is an example of:
A)foreign direct investment.
B)arbitrage opportunity.
C)management of capital budgeting issues.
D)none of the options.
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Mergers and Acquisitions and Financial
Distress
Available Study Resources on Quizplus for this Chatper
82 Verified Questions
82 Flashcards
Source URL: https://quizplus.com/quiz/56999
Sample Questions
Q1) A survey of a local market has provided the following average cost data: Johnson Construction Corp. (JCC) has assets of $3 million and an average cost of 22 percent. Anderson Architects (AA) has assets of $4 million and an average cost of 31 percent. Cole Home Builders (CHB) has assets of $5 million and an average cost of 28 percent. For each firm, average costs are measured as a proportion of assets. JCC is planning to acquire AA and CHB with the expectation of reducing overall average costs by eliminating the duplication of services. If JCC plans to reduce operating costs by $500,000 after the merger, what will the average cost be for the new firm?
A)23.33 percent
B)23.87 percent
C)24.12 percent
D)22.50 percent
Q2) Which of the following is defined as a merged firm's advantage over smaller firms if cuts associated with the merger lower the firm's operating costs of production?
A)Economies of scale
B)Economies of scope
C)Economies of synergy
D)X-efficiencies
To view all questions and flashcards with answers, click on the resource link above. Page 22