Corporate Finance
Mock Exam
Course Introduction
Corporate Finance is an essential course that explores the fundamental principles and techniques used by corporations to make effective financial decisions. Students will learn about the concepts of time value of money, risk and return, capital budgeting, cost of capital, and the valuation of stocks and bonds. The course also addresses topics such as capital structure, dividend policy, working capital management, and mergers and acquisitions. Through theoretical frameworks and practical applications, students gain a comprehensive understanding of how financial managers optimize a firm's value, allocate resources, manage financial risks, and interact with the broader financial markets.
Recommended Textbook
International Corporate Finance 1st Edition by
J. Ashok Robin
Available Study Resources on Quizplus
15 Chapters
741 Verified Questions
741 Flashcards
Source URL: https://quizplus.com/study-set/3350
Page 2
Chapter 1: Introduction
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66553
Sample Questions
Q1) How does the "agency problem" affect the governance of MNCs?
Answer: The "agency problem" refers to the situation that is potentially faced in all businesses,especially corporations.Businesses are owned by someone or by some group of people who have certain interests in the businesses that amount to property rights that usually are in the form of the right to receive a portion of the profit produced by the business.Therefore,these owners want to see the resources of the firm used in a way that will ultimately maximize the value of their interests.However,in business organizations,it is often necessary or convenient for the owners of the business to employ others,who are not owners of the business to actually operate the business on a day-to-day basis.In these cases,the owners are the principles and those that they have employed to operate the business are the agents of the principles.In the typical principle-agent relationship,the agent owes duties to the principles that include carrying out the directives of the principles and safeguarding the principles' interests in the business being managed.Experience has shown,however,that agents sometime act in ways that are in their own best interest rather than in the best interest of their principles,thus giving rise to the "agency problem." This "agency problem" is a special concern for MNCs because the "agency problem" can become more pronounced in larger organizations where decision-making is more decentralized,and MNCs are often larger organizations in which decision-making is more decentralized.
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: International Financial Markets: Structure and Innovation
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66552
Sample Questions
Q1) In _________________,parties agree to rates at which currencies will be exchanged immediately.
A)spot markets
B)forward markets
C)equity markets
D)currency markets
Answer: A
Q2) Eurobonds are bonds that are:
A)the same as foreign bonds.
B)issued in European countries.
C)issued in a country but are denominated in a currency other than the currency of the country where they are issued.
D)issued in a European currency.
Answer: C
Q3) The principal feature of Euro markets is:
A)lack of regulation.
B)high interest rates that are available.
C)lower risks than are present in other markets.
D)lower rates on borrowed funds.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Currency and Eurocurrency Derivatives
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66551
Sample Questions
Q1) Derivative contracts that can be traded after they are made are:
A)illegal.
B)not valuable.
C)forward contracts.
D)financial instruments.
Answer: D
Q2) The nominal value of a forward contract to purchase 5 million United States dollars (USD)is:
A)5 million USD.
B)5.1 million USD.
C)2 million MXP.
D)the nominal value cannot be determined until a future date.
Answer: A
Q3) The best way to deal with counterparty risk is to:
A)make sure that the counterparties are good credit risks.
B)deal only with firms that have been dealt with in previous transactions.
C)avoid it.
D)require counterparties to post collateral to ensure the performance of their obligations.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Currency Systems and Valuation
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66550
Sample Questions
Q1) Countries most likely to use a pegged currency system are those that:
A)have a small economy with a dominant trading partner with a stable currency.
B)have highly structured labor markets and monetary policies.
C)offer attractive investment opportunities for foreign entities.
D)seek as little outside interference from the rest of the world as possible.
Q2) The first step in making the euro the single currency of Europe was:
A)taking steps to make all of the currencies in use in Europe have equal value.
B)linking the value of all currencies in Europe to the USD.
C)the institution of several policies including the freeing of capital flow among member states.
D)obtaining the approval of the International Monetary Fund.
Q3) The currency system of the euro-area nations should be considered:
A)a floating currency system.
B)a crawling per system.
C)a managed float system.
D)a currency board arrangements.
Q4) What was the classical gold standard and why is it not observed today?
Q5) How do price levels in a country affect the value of that country's currency?
Q6) How does a floating currency system allow a country more flexibility in dealing with its economic system?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Currency Parity Conditions
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66549
Sample Questions
Q1) At equilibrium,arbitrage profits are:
A)zero.
B)maximized.
C)difficult to predict.
D)not possible and losses are probable.
Q2) Relative purchasing power parity focuses on ________________ while absolute purchasing power parity focuses on _________________.
A)price levels;price changes
B)inflation;price changes
C)price changes;price levels
D)price changes;inflation
Q3) If an investor borrows funds in currency with a low interest rate and loans those funds in a currency with a higher interest rate but the investor does not acquire a forward contract that assures an acceptable exchange rate for the loaned currency,the transaction is called a (an)________________ transaction.
A)ill-advised
B)currency swap gamble
C)carry trade
D)uncovered interest arbitrage
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Currency Risk Exposure Measurement
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66548
Sample Questions
Q1) One of the results of exchange rate changes that operating exposure considers is:
A)how currency changes affect manufacturing costs.
B)how currency changes affect unit sales.
C)whether currency changes are positive or negative.
D)if currency changes are short-term or long-term.
Q2) For each transaction undertaken by a firm that involves currency risks,three factors must be considered:
A)kind of transaction (loan or borrowing),interest rate,and volatility of the currency involved.
B)amount involved,timing of the transaction,and volatility of the currency involved.
C)amount involved,interest rate,and timing of the transaction.
D)kind of transaction (loan or borrowing),timing of the transaction,and volatility of the currency involved.
Q3) In the Markowitz Portfolio Approach,risk is reduced by:
A)the diversification of assets.
B)the correlation between assets.
C)investing in arrangements that return cash to the firm at different times.
D)investing in real assets rather than derivatives.
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 7: Currency Exposure Management
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66547
Sample Questions
Q1) How significant is currency risk compared to other risks that an MNC might face?
Q2) If a firm cannot use available tax shields in the year those tax shields are available,what happens to the benefits of those tax shields?
A)The benefits are not lost or reduced because they can be used to offset or reduce future taxable income.
B)The benefits of the tax shields are always lost and cannot be taken advantage of in future years.
C)The benefits are allocated to other firms in the industry.
D)The benefits provided by the tax shields are either lost because the tax shield benefits expire or are reduced because the benefits are taken in later years.
Q3) "On Balance Sheet Commitments" are:
A)items such as receivables that constitute a significant part of a firm's transaction exposure.
B)items such as inventory that is not involved in a firm's transaction exposure.
C)items in connection with which the firm has some liability.
D)obligations owed by a firm to another firm that depends on currency values at a particular time.
Q4) Why are firm managers generally considered to be risk-adverse?
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Capital Budgeting
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66546
Sample Questions
Q1) What is usually the most important factor in the outsourcing decision?
A)The revenue that the decision will generate
B)How upper management views the decision
C)Whether the firm has pre-existing relationships in the region
D)The cost savings that will result from the decision
Q2) In considering production in a foreign country,a firm must consider risk factors such as:
A)inflation in the price of inputs and losses arising from poor quality production.
B)domestic labor unrest and changes in home-country tax laws.
C)changes in import restrictions and the added costs of bribes that must be paid in the foreign country.
D)WTO rulings and requirements of other international trade agreements.
Q3) The least difficult aspect of the cash flow calculation is:
A)determining the profit that the firm can expect from the project.
B)determining the tax consequences of the project to the firm.
C)estimating the direct operating expenses that the project will require.
D)estimating the initial investment that the firm has to make in the project.
Q4) What are the components of country risk?
Q5) How is NPV calculated and what information does NPV provide to a firm?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Advanced Capital Budgeting
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66545
Sample Questions
Q1) In the international context,barriers to entry into certain markets include:
A)costs and difficulty of creating new products.
B)lax environmental regulations and consumer protection laws.
C)complex regulations and diversity of consumer demands.
D)lack of understanding of local customs and competition.
Q2) What pre-planning can a firm do in anticipation that the demand for products produced by a project will not meet expectations?
A)The firm can wait until the demand is determined before committing to the project.
B)The firm can arrange for a buyer to buy the project in the event that demand is below expectations.
C)The firm can arrange to outsource components of the product and can use temporary labor that can be reduced quickly.
D)The firm can produce as expected despite the demand.
Q3) What are real options and how do they affect the estimated value of projects?
Q4) How do remittance restrictions impact the cash flow to the parent from a project?
Q5) What are the causes of parent-subsidiary asymmetry?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Long-Term Financing
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66544
Sample Questions
Q1) One characteristic that distinguishes MNCs from domestic organizations and that makes MNCs better risks than domestic organizations is that:
A)MNCs are better organized than domestic organizations.
B)domestic organizations are not as high-profile as MNCs.
C)MNCs are more in touch with markets than domestic organizations.
D)MNCs have diversified portfolios of cash flow.
Q2) A bond issued in a country in a currency other than the currency of the country where it is issued is considered to be a:
A)foreign bond.
B)Eurobond.
C)domestic bond.
D)ninja bond.
Q3) By considering the cost of debt and the cost of equity of a firm and weighing each cost according to the proportion that each occupies in the firm's capital structure,the _______________________ can be determined.
A)weighted discount rate
B)average cost of debt and equity
C)weighted average cost of capital
D)cost of capital
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Optimizing and Financing Working Capital
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66543
Sample Questions
Q1) "Ex ante" financing costs refer to:
A)a firm's estimate of the future spot rate of the currency in which it is obtaining financing.
B)the actual future spot rate of the currency in which it is obtaining financing.
C)the cost of financing not including the interest that will be paid in connection with the financing.
D)all costs of a firm's financing after a loan has been completely paid.
Q2) If an MNC borrows in a foreign currency and the value of that currency appreciates during the term of the loan:
A)the MNC will not be affected because its obligations are established when the loan is made.
B)the MNC can cancel the loan and refund the proceeds of the loan.
C)the MNC will have to repay the principle and interest of the loan in a more valuable currency.
D)the lender will have the option of canceling the loan.
Q3) What is working capital,and how is working capital affected by short-term financing?
Q4) How does a firm monetize receivables?
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: International Alliances and Acquisitions
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/66542
Sample Questions
Q1) Real options can affect the value of a potential target in a merger or acquisition.The acquiring firm,in determining how real options affect the value of the target must,most importantly,consider:
A)whether the real options belong to the target or to a subsidiary of the target.
B)how restrictions on remittances affect the real options.
C)whether the real option requires additional investments.
D)when the real options will be exercised.
Q2) The per share value of a target in a merger or acquisition is determined by:
A)dividing the equity value of the target by the number of shares outstanding.
B)dividing the total value of the target by the number of shares that the target is authorized to issue.
C)multiplying the number of shares outstanding by the market price of the shares.
D)adding the equity value of the firm and the market price of its shares and dividing by the number of shares outstanding.
Q3) What is terminal value and why is it important in evaluating the value of a potential acquisition?
Q4) What is the difference between private equity funds and hedge funds?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: International Trade
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66541
Sample Questions
Q1) The G8 includes seven major nations that are members of the Organization for Economic Co-operation and Development plus:
A)Canada.
B)Japan.
C)Russia.
D)Brazil.
Q2) The International Bank for Reconstruction and Development is primarily funded by:
A)interest collected on loans made in past years.
B)the member nations of the United Nations.
C)issuing bonds in global debt markets.
D)fines imposed by the World Trade Organization for trade restriction violations.
Q3) The periodic negotiations of the WTO aimed at eliminating specific forms of unfair trade practices are called:
A)conferences.
B)rounds.
C)agreements.
D)accords.
Q4) Describe the process by which a letter of credit is paid.
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: International Taxation and Accounting
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66540
Sample Questions
Q1) What does transfer pricing mean in the context of the operations of MNCs?
Q2) How important are taxes to the economies of countries?
A)Taxes constitute at least one-third of the gross domestic product of a country,so taxes are vital to a country's economy.
B)Taxes constitute for more than half of the money that governments have to spend,so the economies of countries depend on tax collections.
C)Taxes are only a relatively small part of the economy of most countries and,therefore,are only moderately important to the economy of a country.
D)Many countries,especially developing countries,do not collect taxes,so taxes are not an important part of the economy of most countries.
Q3) Tax strategies involving transfer pricing depend on ________________ rather than ______________________.
A)marginal tax rates rather than average tax rates
B)marginal tax rates;published tax rates
C)average tax rates;published tax rates
D)published tax rates;average tax rates
Q4) How does the concept of double taxation apply to MNCs?
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: International Portfolio Investments
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/66539
Sample Questions
Q1) If there is a positive correlation between the value of an asset that is invested in and the value of the currency in which that value is represented:
A)the covariance risk increases.
B)the risk associated with the investment is reduced.
C)the economic risk is increased.
D)the economic risk and the default risk move in opposite directions and reduce overall risk.
Q2) Mutual funds whose investments are limited to one or more countries are generally:
A)closed-end funds.
B)open-end funds.
C)ongoing funds.
D)regulated funds.
Q3) The phenomenon that is evidenced by an underrepresentation of foreign investments in a portfolio is known as:
A)weighted-average investing.
B)home bias.
C)foreign bias.
D)portfolio investing.
To view all questions and flashcards with answers, click on the resource link above.
17