Intermediate Corporate Finance
Review Questions
Course Introduction
Intermediate Corporate Finance builds upon foundational finance principles to deepen understanding of key financial decisions faced by corporations. The course covers advanced topics such as capital structure, dividend policy, mergers and acquisitions, corporate valuation, risk management, and the use of financial derivatives. Students analyze real-world case studies, apply quantitative methods, and assess the effects of financial markets and economic conditions on corporate strategies. Emphasis is placed on critical thinking and practical application of financial theories to make informed business decisions, preparing students for more specialized finance roles or further academic study.
Recommended Textbook
Corporate Finance The Core 3rd Edition by Jonathan Berk
Available Study Resources on Quizplus
19 Chapters
1719 Verified Questions
1719 Flashcards
Source URL: https://quizplus.com/study-set/3331
Page 2
Chapter 1: The Corporation
Available Study Resources on Quizplus for this Chatper
37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/66167
Sample Questions
Q1) Do corporate decisions that increase the value of the firm's equity benefit society as a whole?
A) Yes, as long as the value of the firm's equity increases, society is better off.
B) Yes, as long as the increase in the value of the firm's equity does not come at the expense of others.
C) No, any gain in the value of the firm's equity is always less than the cost to society.
D) No, any gains in the value of the firm's equity are perfectly offset by societal costs.
Answer: B
Q2) Which of the following organization forms accounts for the greatest number of firms?
A) "S" corporation
B) Limited partnership
C) Sole proprietorship
D) "C" corporation
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Introduction to Financial Statement Analysis
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/66168
Sample Questions
Q1) Which of the following adjustments is NOT correct if you are trying to calculate cash flow from financing activities?
A) Add dividends paid
B) Add any increase in long term borrowing
C) Add any increase in short-term borrowing
D) Add proceeds from the sale of stock
Answer: A
Q2) Luther Corporation's stock price is $39 per share and the company has 20 million shares outstanding.Its book value Debt -Equity Ratio for 2009 is closest to:
A) 2.29
B) 0.31
C) 1.89
D) 0.37
Answer: A
Q3) What are the four financial statements that all public companies must produce?
Answer: 1.Balance Sheet
2.Income Statement
3.Statement of Cash Flows
4.Statement of Stockholder's Equity
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Financial Decision Making and the Law of One
Price
Available Study Resources on Quizplus for this Chatper
89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/66169
Sample Questions
Q1) What is the NPV of this project if the film maker invests his own money and does not issue the new security? What is the NPV if the film maker issues the new security?
A) $1.7 million; $1.7 million
B) $1.7 million; $2.7 million
C) $2.7 million; $1.7 million
D) $2.7 million; $2.7 million
Answer: D
Q2) If the interest rate is 7%,the NPV of alternative #3 is closest to:
A) $350,000
B) $357,196
C) $370,561
D) $401,121
Answer: B
Q3) Consider an ETF that is made up of one share each of IBM,MRK,and C.The current quote for this ETF currently is $162.85 (bid)$163.00 (ask).What should you do?
Answer: Nothing,there is no arbitrage opportunity here.The ask price must fall below $162.85 or the bid price must be above $163 for there to be an arbitrage.
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: The Time Value of Money
Available Study Resources on Quizplus for this Chatper
89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/66170
Sample Questions
Q1) Kampgrounds Inc.is considering purchasing a parcel of wilderness land near a popular historic site.Although this land will cost Kampgrounds $400,000 today,by renting out wilderness campsites on this land,Kampgrounds expects to make $35,000 at the end of every year indefinitely.If the appropriate discount rate is 8%,then the NPV of this new wilderness campsite is closest to:
A) -$50,000
B) -$37,500
C) $37,500
D) $50,000
Q2) Which of the following statements regarding the timeline is FALSE?
A) Date 1 is the end of the first year.
B) Date 0 is the beginning of the first year.
C) The space between date 0 and date 1 represents the time period between two specific dates.
D) You will find the timeline most useful in tracking cash flows if you interpret each point on the timeline as a period or interval of time.
Q3) Draw a timeline detailing the cash flows from investment "A."
Q4) Draw a timeline detailing the cash flows from investment "B."
Q5) The future value at retirement (age 65)of your savings is:
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Interest Rates
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/66171
Sample Questions
Q1) Suppose the interest rate is 9% APR with monthly compounding.Then the present value of an annuity that pays $250 every three months for the next five years is closest to:
A) $2,280
B) $3,985
C) $3,990
D) $3,995
Q2) The effective annual rate (EAR)for a loan with a stated APR of 10% compounded quarterly is closest to:
A) 9.65%
B) 10.00%
C) 10.38%
D) 12.50%
Q3) Dagny's monthly payments are closest to:
A) $1,110
B) $1,800
C) $2,215
D) $2,245
Q4) What is the NPV of an investment that costs $2500 and pays $1000 certain at the end of one,three,and five years?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Valuing Bonds
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/66172
Sample Questions
Q1) The discount rate that sets the present value of the promised bond payments equal to the current market price of the bond is called:
A) the current yield.
B) the yield to maturity.
C) the zero coupon yield.
D) the discount yield.
Q2) The YTM of a 4 year default free security with a face value of $1000 and an annual coupon rate of 5.25% is closest to:
A) 5.2%
B) 5.0%
C) 4.9%
D) 5.25%
Q3) The price (expressed as a percentage of the face value)of a one-year,zero-coupon corporate bond with a AAA rating is closest to:
A) 94.70
B) 95.60
C) 94.16
D) 95.42
Q4) Plot the zero-coupon yield curve (for the first five years).
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Investment Decision Rules
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/66173
Sample Questions
Q1) The payback period for project Alpha is closest to:
A) 3.2 years
B) 2.9 years
C) 3.1 years
D) 2.6 years
Q2) Assume the appropriate discount rate for this project is 15%.The profitability index for this project is closest to:
A) .14
B) .22
C) .60
D) .15
Q3) The NPV for Boulderado's snowboard project is closest to:
A) $228,900
B) $46,900
C) $51,600
D) $23,800
Q4) If your new strip mall will have 16,000 square feet of retail space available to be leased,to which businesses should you lease and why?
Q5) If the discount rate for project A is 16%,then what is the NPV for project A?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Fundamentals of Capital Budgeting
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/66174
Sample Questions
Q1) The free cash flow from Shepard Industries project in year one is closest to:
A) $240
B) $300
C) -$5
D) $390
Q2) The incremental cash flow that the Krusty Krab will incur today (Year 0)if they elect to upgrade to the new grill is closest to:
A) -80,000
B) -50,000
C) -46,500
D) +30,000
Q3) Assume that Kinston's new machine will be depreciated straight line to a salvage value of $5,000 at the end of year three.What is the NPV for this project?
Q4) What is sensitivity analysis?
Q5) The NPV for Epiphany's Project is closest to:
A) $4,825
B) $39,000
C) $11,946
D) $20,400
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Valuing Stocks
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/66175
Sample Questions
Q1) The Sisyphean Company's common stock is currently trading for $25.00 per share.The stock is expected to pay a $2.50 dividend at the end of the year and the Sisyphean Company's equity cost of capital is 14%.If the dividend payout rate is expected to remain constant,then the expected growth rate in the Sisyphean Company's earnings is closest to:
A) 8%
B) 6%
C) 4%
D) 2%
Q2) Von Bora Corporation (VBC)is expected to pay a $2.00 dividend at the end of this year.If you expect VBC's dividend to grow by 5% per year forever and VBC's equity cost of capital is 13%,then the value of a share of VBS stock is closest to:
A) $25.00
B) $40.00
C) $15.40
D) $11.10
Q3) What are the implications of the efficient market hypothesis for corporate managers?
Q4) What are some common multiples used to value stocks?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Capital Markets and the Pricing of Risk
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/66176
Sample Questions
Q1) The standard deviation of Little Cure's average net income for their ten new drugs is closest to:
A) $50 million
B) $25 million
C) $16 million
D) $500 million
Q2) The expected overall payoff to Bank A is:
A) $5,000,000
B) $6,000,000
C) $94,000,000
D) $95,000,000
Q3) Suppose an investment is equally likely to have a 35% return or a - 20% return.The variance on the return for this investment is closest to:
A) .151
B) .0378
C) 0
D) .075
Q4) Which pharmaceutical company faces less risk?
Q5) What is the market portfolio?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Optimal Portfolio Choice and the Capital Asset Pricing Model
Available Study Resources on Quizplus for this Chatper
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/66177
Sample Questions
Q1) Suppose over the next year Ball has a return of 12.5%,Lowes has a return of 20%,and Abbott Labs has a return of -10%.The value of your portfolio over the year is:
A) $21,000
B) $20,000
C) $20,700
D) $21,500
Q2) The beta on Peter's Portfolio is closest to:
A) 0.7
B) 0.8
C) 1.8
D) 1.0
Q3) What is the efficient frontier and how does it change when more stocks are used to construct portfolios?
Q4) The variance on a portfolio that is made up of equal investments in Duke Energy and Microsoft stock is closest to:
A) .065
B) 0.090
C) .149
D) -0.020
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: Estimating the Cost of Capital
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/66178
Sample Questions
Q1) One factor that can affect the market risk of a project is its degree of operating leverage,which is:
A) the relative proportion of operating assets versus non-operating assets.
B) the relative proportion of operating assets versus equity.
C) the relative proportion of operating expenses versus non-operating expenses.
D) the relative proportion of fixed versus variable costs.
Q2) Which of the following statements is FALSE?
A) The most familiar stock index in the United States is the Dow Jones Industrial Average (DJIA).
B) A portfolio in which each security is held in proportion to its market capitalization is called a price-weighted portfolio.
C) The Dow Jones Industrial Average (DJIA) consists of a portfolio of 30 large industrial stocks.
D) The Dow Jones Industrial Average (DJIA) is a price-weighted portfolio.
Q3) Your estimate of the asset beta for Nielson Motors is closest to:
A) 0.59
B) 0.66
C) 0.71
D) 1.75
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Investor Behavior and Capital Market Efficiency
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/66179
Sample Questions
Q1) The term is a(n):
A) measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the first factor portfolio.
B) error term that has an expectation of zero and is uncorrelated with either factor.
C) measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the second factor portfolio.
D) constant term.
Q2) Which of the following stocks represent buying opportunities? 1.Taggart Transcontinental
2)Rearden Metal
3)Wyatt Oil
4)Nielson Motors
A) 1 only
B) 1 and 2 only
C) 2 and 3 only
D) 2 and 4 only
Q3) What does the existence of a positive alpha investment strategy imply?
Q4) Explain why the market portfolio proxy may not be efficient.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Capital Structure in a Perfect Market
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/66180
Sample Questions
Q1) Assume that MM's perfect capital markets conditions are met and that you can borrow and lend at the same 5% rate as With.You have $5000 of your own money to invest and you plan on buying Without stock.Using homemade leverage,how much do you need to borrow in your margin account so that the payoff of your margined purchase of Without stock will be the same as a $5000 investment in With stock?
A) $10,000
B) $5000
C) $2,500
D) $0
Q2) Suppose that to raise the funds for the initial investment the firm borrows $80,000 at the risk free rate,then the cost of capital for the firm's levered equity is closest to:
A) 45%
B) 25%
C) 15%
D) 95%
Q3) What is the conservation of value principle?
Q4) What is a market value balance sheet and how does it differ from a book value balance sheet?
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Debt and Taxes
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/66181
Sample Questions
Q1) Assume that investors hold Google stock in retirement accounts that are free from personal taxes.If Google were to issue sufficient debt to reduce its taxes by $600 million per year permanently,then the value that would be created is closest to:
A) $6.4 billion
B) $8.6 billion
C) $9.8 billion
D) $14.3 billion
Q2) Which of the following statements is FALSE?
A) The higher the firm's leverage, the more the firm exploits the tax advantage of debt, and the lower its WACC.
B) Corporate taxes lower the effective cost of debt financing, which translates into a reduction in the weighted average cost of capital.
C) Because the firm's free cash flow is computed without considering the firm's leverage, we account for the benefit of the interest tax shield by calculating the WACC using the before tax cost of debt.
D) The reduction in the WACC increases with the amount of debt financing.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Financial Distress, managerial Incentives, and Information
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/66182
Sample Questions
Q1) Which of the following is NOT an indirect cost of bankruptcy?
A) Loss of suppliers
B) Fire sales of assets
C) Costs of appraisers
D) Loss of employees
Q2) Suppose that MI has zero-coupon debt with a $125 million face value due next year.The initial value of MI's debt is closest to:
A) $125 million
B) $111 million
C) $100 million
D) $116 million
Q3) Assume that capital markets are perfect,you issue $30 million in new debt,and you issue $20 million in new equity.You ownership stake in the firm following these new issues of debt and equity is closest to:
A) 58%
B) 50%
C) 33%
D) 55%
Q4) List five general categories of indirect costs associated with bankruptcy.
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Payout Policy
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/66183
Sample Questions
Q1) The value of Iota if they use the $200 million to expand is closest to:
A) $825 million
B) $688 million
C) $840 million
D) $950 million
Q2) If Wyatt Oil distributes the $70 million as a share repurchase,then its stock price after the share repurchase will be closest to:
A) $11.00
B) $12.50
C) $14.00
D) $17.50
Q3) Assume that Omicron uses the entire $50 million to repurchase shares.The number of shares that Omicron will repurchase is closest to:
A) 1.0 million
B) 1.2 million
C) 1.1 million
D) 0.9 million
Q4) Calculate the effective tax disadvantage for retaining cash in 1999,2001,and 2005.
To view all questions and flashcards with answers, click on the resource link above.
19
Chapter 18: Capital Budgeting and Valuation With Leverage
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/66184
Sample Questions
Q1) Which of the following statements is FALSE?
A) To determine the project's debt capacity for the interest tax shield calculation, we need to know the value of the project.
B) To compute the present value of the interest tax shield, we need to determine the appropriate cost of capital.
C) Because we don't value the tax shield separately, with the APV method we need to include the benefit of the tax shield in the discount rate as we do in the WACC method.
D) A target leverage ratio means that the firm adjusts its debt proportionally to the project's value or its cash flows.
Q2) Galt's free cash flow to equity (FCFE)is closest to:
A) $19.2 million
B) $20.4 million
C) $21.2 million
D) $24.0 million
Q3) Suppose that to fund this new project,Aardvark borrows $150 with the principal to be paid in three equal installments at the end each year.Calculate the present value of Aardvark's interest tax shield.
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: Valuation and Financial Modeling: a Case Study
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/66185
Sample Questions
Q1) Ideko's Accounts Receivable Days is closest to:
A) 84 days
B) 95 days
C) 90 days
D) 75 days
Q2) Assuming that Ideko has a EBITDA multiple of 9.4,then the continuation levered P/E ratio of Ideko in 2010 is closest to:
A) 17.2
B) 14.5
C) 19.0
D) 16.4
Q3) The amount of net working capital for Ideko in 2008 is closest to:
A) $35,195
B) $26,420
C) $22,170
D) $30,510
Q4) What range for the market value of equity for Ideko is implied by the range of EV/Sales multiples for the comparable firms if Ideko holds $6.5 million of cash in excess of its working capital needs?
Q5) What is the purpose of the sensitivity analysis?
To view all questions and flashcards with answers, click on the resource link above. Page 21