中山大学财务管理期末试卷(英语)2.doc

PP考资料网资料分享平台FINANCIAL MANAGEMENT EXAMINATION(2)Time: 2 Hours Marks:A. Define and briefly explain each of the following terms (10 points)1. Free Cash Flow 2. Market Risk 3. Internal Rate of Raturn 4. CAPM5. Breakeven AnalysisB. Multiple Choice Questions(40 points)1.Businesses can be organized asA) sole proprietorshipsB) partnershipsC) corporationsD) any of the above2.Limited liability is an important feature of:A) Sole proprietorshipsB) PartnershipsC) CorporationsD) All of the above3.In finance, shortterm meansA) less than three monthsB) less than six monthsC) less than one yearD) less than five years4.Conflicts of interest between shareholders and managers of a firm result in:A) Principalagent problemB) Increased agency costsC) Both A and BD) None of the above5.The financial goal of a corporation is to:A) Maximize salesB) Maximize profitsC) Maximize the value of the firm for the shareholdersD) Maximize managers benefits6.If the present value of $480 expected to be received one year from today is $400,what is the discount rate?A) 10%B) 20%C) 30%D) None of the above7.If the present value of a cash flow generated by an initial investment of $100,000 is$120,000, what is the NPV of the project?A) $120,000B) $20,000C) $100,000D) None of the above8.There are two reasons for discounting future cash flow. They are:A) A dollar today is worth more than a dollar tomorrow (for positive interest rates)B) A safe dollar is worth more than a risky oneC) The value of a dollar is changing all the timeD) A and B above9.The financial goal of a corporation is to:A) Minimize stockholder wealthB) Maximize profitC) Maximize value of the corporation to the stockholdersD) None of the above10.The variance or standard deviation is a measure of:A) Total riskB) Unique riskC) Market riskD) None of the above11.If the present value of the cash flow X is $200, and the present value cash flow Y $150, than the present value of the combined cash flow is:A) $200B) $150C) $50D) $35012.What is the present value of $10,000 per year perpetuity at an interest rate of 5%?A) $10,000B) $100,000C) $200,000D) None of the above13.An annuity is defined asA) Equal cash flows at equal intervals of time foreverB) Equal cash flows at equal intervals of time for a specific periodC) Unequal cash flows at equal intervals of time foreverD) None of the above14. If the present annuity factor is 3.89, what is the present value annuity factor for anequivalent annuity due if the interest rate is 9%?A) 3.57B) 4.24C) 3.89D) None of the above.15.The value of a common stock today depends on:A) Number of shares outstanding and the number of shareholdersB) The Wall Street analystsC) The expected future dividends and the discount rateD) Present value of the future earnings per share16. Super Computer Companys stock is selling for $100 per share today. It is expected that this stock will pay a dividend of 5 dollars per share, and then be sold for $120 per share at the end of one year. Calculate the expected rate of return for the shareholders.A) 20%B) 25%C) 10%D) 15%17.Mcom Co. is expected to pay a dividend of $4 per share at the end of year one and the dividends are expected to grow at a constant rate of 4% forever. If the current price of the stock is $25 per share calculated the required rate of return or the market capitalization rate for the firms stock.A) 4%B) 16%C) 20%D) None of the above.18.Which of the following investment rules does not use the time value of the money concept?A) The payback periodB) Internal rate of returnC) Net present valueD) All of the above use the time value concept19.The net present value of a project depends upon:A) forecasted cash flows and opportunity cost of capitalB) managers tastes and preferencesC) companys choice of accounting methodD) all of the above20.The main advantage of the payback rule is:A) Adjustment for uncertainty of early cash flowsB) It is simple to useC) Does not discount cash flowsD) Both A and CC. True/False Questions(20 points)T F 1.One distinctive feature of a corporation is that there is no separation of ownership and control.T F 2.In a sole proprietorship, the owner is also the manager, and hence, agencycosts are at a minimum.T F 3.The discount rate, hurdle rate or opportunity cost of capital all mean the same.T F 4.The rate of return on a perpetuity is equal to the cash flow divided by the price.T F 5.The relationship between nominal interest rate and real interest rate is given by: 1 + rnominal = (1 + rreal)(1+inflation rate)T F 6.Compound interest assumes that you are reinvesting the interest payments at the rate of return.T F 7.At each point in time, all securities in an equivalentrisk class are priced to offer the same expected return.T F 8.The payback rule gives equal weight to all cash flows before the payback date and zero weight to subsequent cash flows.T F 9.The IRR rule states that firms should accept any project offering an internal rate of return in excess of the cost of capital.T F 10.Do not forget to include interest and dividend payments when calculating the projects cash flow.T F 11.Depreciation acts as a tax shield in reducing the taxes.T F 12.Risk premium is the difference between the security return and the Treasury bill return.T F 13.Diversification reduces risk because prices of different securities do not move exactly together.T F 14.Beta of a welldiversified portfolio is equal to the value weighted average beta of the securities included in the portfolio.T F 15.Investors are mainly concerned with those risks that can be eliminated through diversification.T F 16.The company cost of capital is the correct discount rate for any project undertaken by the company.T F 17.Risky projects can be evaluated by discounting certainty equivalent cash flows at the riskfree interest rate.T F 18.Risky projects can be evaluated by discounting the expected cash flows at a riskadjusted discount rate.T F 19.Firms that break even on an accounting basis are really losing the opportunity cost of capital on their investments.T F 20.Projects with high fixed costs have higher breakevenpoints.D. Answer the following questions (30 points)1. Respond to the following comment: “Its all very well telling companies to maximize net present value, but net present value is just an abstract notion. What I tell my managers is that profits are what matters and Its profits that were going to maximize.”2. What is the net present value rule? What is the rate of retu