罗斯公司理财题库cha19
公司理财罗斯习题集
财务综合分析
通过分析净资产收益率、总资产周转率和权益乘数等指标，评估企业的财务状况和经营绩效。
杜邦分析法
通过对流动比率、存货周转率、应收账款周转率等指标进行加权平均，评估企业的财务状况和经营绩效。
沃尔评分法
通过计算税后净营业利润减去资本成本后的剩余经济价值，评估企业的价值创造能力。
有效市场假说
有效市场假说认为市场是有效的，即市场价格反映了所有可获得的信息，因此无法通过分析信息获资金管理
现金管理
交易动机、预防动机、投机动机。 持有现金的动机 现金管理的目标 现金管理的方法 安全性、流动性、收益性。 建立最佳现金余额、加速收款、延迟付款。
财务趋势分析
衡量企业营业收入的增长情况，计算公式为（本期营业收入-上期营业收入）除以上期营业收入。
营业收入增长率
净利润增长率
总资产增长率
股东权益增长率
衡量企业净利润的增长情况，计算公式为（本期净利润-上期净利润）除以上期净利润。
衡量企业资产规模的增长情况，计算公式为（本期总资产-上期总资产）除以析
财务比率分析
流动比率 速动比率 资产负债率 利息保障倍数 衡量企业短期偿债能力，计算公式为流动资产除以流动负债。 衡量企业长期偿债能力，计算公式为负债总额除以资产总额。 衡量企业快速偿债能力，计算公式为（流动资产-存货）除以流动负债。 衡量企业支付利息的能力，计算公式为息税前利润除配与股利政策
利润分配的原则与程序
依法分配原则、弥补亏损原则、先提取法定公积金原则、提取任意公积金原则、股东平等原则。
利润分配原则
弥补亏损提取法定公积金、提取任意公积金、支付股利。
英文版罗斯公司理财习题答案ChapWord版
CHAPTER 8MAKING CAPITAL INVESTMENT DECISIONSAnswers to Concepts Review and Critical Thinking Questions1.In this context, an opportunity cost refers to the value of an asset or other input that will be used in aproject. The relevant cost is what the asset or input is actually worth today, not, for example, what it cost to acquire.2. a.Yes, the reduction in the sales of the company’s other products, referred to as erosion, andshould be treated as an incremental cash flow. These lost sales are included because they are a cost (a revenue reduction) that the firm must bear if it chooses to produce the new product.b. Yes, expenditures on plant and equipment should be treated as incremental cash flows. Theseare costs of the new product line. However, if these expenditures have already occurred, they are sunk costs and are not included as incremental cash flows.c. No, the research and development costs should not be treated as incremental cash flows. Thecosts of research and development undertaken on the product during the past 3 years are sunk costs and should not be included in the evaluation of the project. Decisions made and costs incurred in the past cannot be changed. They should not affect the decision to accept or reject the project.d. Yes, the annual depreciation expense should be treated as an incremental cash flow.Depreciation expense must be taken into account when calculating the cash flows related to a given project. While depreciation is not a cash expense that directly affects cash flow, it decreases a firm’s net income and hence, lowers its tax bill for the year. Because of this depreciation tax shield, the firm has more cash on hand at the end of the year than it would have had without expensing depreciation.e.No, dividend payments should not be treated as incremental cash flows. A firm’s decision topay or not pay dividends is independent of the decision to accept or reject any given investment project. For this reason, it is not an incremental cash flow to a given project. Dividend policy is discussed in more detail in later chapters.f.Yes, the resale value of plant and equipment at the end of a project’s life should be treated as anincremental cash flow. The price at which the firm sells the equipment is a cash inflow, and any difference between the book value of the equipment and its sale price will create gains or lossesthat result in either a tax credit or liability.g.Yes, salary and medical costs for production employees hired for a project should be treated asincremental cash flows. The salaries of all personnel connected to the project must be included as costs of that project.3.Item I is a relevant cost because the opportunity to sell the land is lost if the new golf club is produced. Item II is also relevant because the firm must take into account the erosion of sales of existing products when a new product is introduced. If the firm produces the new club, the earnings from the existing clubs will decrease, effectively creating a cost that must be included in the decision.Item III is not relevant because the costs of Research and Development are sunk costs. Decisions made in the past cannot be changed. They are not relevant to the production of the new clubs.4.For tax purposes, a firm would choose MACRS because it provides for larger depreciationdeductions earlier. These larger deductions reduce taxes, but have no other cash consequences.Notice that the choice between MACRS and straight-line is purely a time value issue; the total depreciation is the same; only the timing differs.5.It’s probably only a mild over-simplification. Current liabilities will all be paid, presumably. Thecash portion of current assets will be retrieved. Some receivables won’t be collected, and some inventory will not be sold, of course. Counterbalancing these losses is the fact that inventory sold above cost (and not replaced at the end of the project’s life) acts to increase working capital. These effects tend to offset one another.6.Management’s discretion to set the firm’s capital structure is applicable at the firm level. Since anyone particular project could be financed entirely with equity, another project could be financed with debt, and the firm’s overall capital structure remains unchanged, financing cost s are not relevant in the analysis of a project’s incremental cash flows according to the stand-alone principle.7.The EAC approach is appropriate when comparing mutually exclusive projects with different livesthat will be replaced when they wear out. This type of analysis is necessary so that the projects havea common life span over which they can be compared; in effect, each project is assumed to existover an infinite horizon of N-year repeating projects. Assuming that this type of analysis is valid implies that the project cash flows remain the same forever, thus ignoring the possible effects of, among other things: (1) inflation, (2) changing economic conditions, (3) the increasing unreliability of cash flow estimates that occur far into the future, and (4) the possible effects of future technology improvement that could alter the project cash flows.8.Depreciation is a non-cash expense, but it is tax-deductible on the income statement. Thusdepreciation causes taxes paid, an actual cash outflow, to be reduced by an amount equal to the depreciation tax shield, t c D. A reduction in taxes that would otherwise be paid is the same thing as a cash inflow, so the effects of the depreciation tax shield must be added in to get the total incremental aftertax cash flows.9.There are two particularly important considerations. The first is erosion. Will the “essentialized”book simply displace copies of the existing book that would have otherwise been sold? This is of special concern given the lower price. The second consideration is competition. Will other publishers step in and produce such a product? If so, then any erosion is much less relevant. A particular concern to book publishers (and producers of a variety of other product types) is that the publisher only makes money from the sale of new books. Thus, it is important to examine whether the new book would displace sales of used books (good from the publisher’s perspective) or new books (not good). The concern arises any time there is an active market for used product.10.Definitely. The damage to Porsche’s reputation is definitely a factor the company needed to consider.If the reputation was damaged, the company would have lost sales of its existing car lines.11.One company may be able to produce at lower incremental cost or market better. Also, of course,one of the two may have made a mistake!12.Porsche would recognize that the outsized profits would dwindle as more products come to marketand competition becomes more intense.Solutions to Questions and ProblemsNOTE: All end-of-chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and readability constraints, when these intermediate steps are included in this solutions manual, rounding may appear to have occurred. However, the final answer for each problem is found without rounding during any step in the problem.Basicing the tax shield approach to calculating OCF, we get:OCF = (Sales – Costs)(1 – t C) + t C DepreciationOCF = [($5 × 2,000 – ($2 × 2,000)](1 – 0.35) + 0.35($10,000/5)OCF = $4,600So, the NPV of the project is:NPV = –$10,000 + $4,600(PVIFA17%,5)NPV = $4,7172.We will use the bottom-up approach to calculate the operating cash flow for each year. We also mustbe sure to include the net working capital cash flows each year. So, the total cash flow each year will be:Year 1 Year 2 Year 3 Year 4 Sales Rs.7,000 Rs.7,000 Rs.7,000 Rs.7,000Costs 2,000 2,000 2,000 2,000Depreciation 2,500 2,500 2,500 2,500EBT Rs.2,500 Rs.2,500 Rs.2,500 Rs.2,500Tax 850 850 850 850Net income Rs.1,650 Rs.1,650 Rs.1,650 Rs.1,650OCF 0 Rs.4,150 Rs.4,150 Rs.4,150 Rs.4,150Capital spending –Rs.10,000 0 0 0 0NWC –200 –250 –300 –200 950Incremental cashflow –Rs.10,200 Rs.3,900 Rs.3,850 Rs.3,950 Rs.5,100The NPV for the project is:NPV = –Rs.10,200 + Rs.3,900 / 1.10 + Rs.3,850 / 1.102 + Rs.3,950 / 1.103 + Rs.5,100 / 1.104NPV = Rs.2,978.333. Using the tax shield approach to calculating OCF, we get:OCF = (Sales – Costs)(1 – t C) + t C DepreciationOCF = (R2,400,000 – 960,000)(1 – 0.30) + 0.30(R2,700,000/3)OCF = R1,278,000So, the NPV of the project is:NPV = –R2,700,000 + R1,278,000(PVIFA15%,3)NPV = R217,961.704.The cash outflow at the beginning of the project will increase because of the spending on NWC. Atthe end of the project, the company will recover the NWC, so it will be a cash inflow. The sale of the equipment will result in a cash inflow, but we also must account for the taxes which will be paid on this sale. So, the cash flows for each year of the project will be:Year Cash Flow0 – R3,000,000 = –R2.7M – 300K1 1,278,0002 1,278,0003 1,725,000 = R1,278,000 + 300,000 + 210,000 + (0 – 210,000)(.30)And the NPV of the project is:NPV = –R3,000,000 + R1,278,000(PVIFA15%,2) + (R1,725,000 / 1.153)NPV = R211,871.465. First we will calculate the annual depreciation for the equipment necessary for the project. Thedepreciation amount each year will be:Year 1 depreciation = R2.7M(0.3330) = R899,100Year 2 depreciation = R2.7M(0.4440) = R1,198,800Year 3 depreciation = R2.7M(0.1480) = R399,600So, the book value of the equipment at the end of three years, which will be the initial investment minus the accumulated depreciation, is:Book value in 3 years = R2.7M – (R899,100 + 1,198,800 + 399,600)Book value in 3 years = R202,500The asset is sold at a gain to book value, so this gain is taxable.Aftertax salvage value = R202,500 + (R202,500 – 210,000)(0.30)Aftertax salvage value = R207,750To calculate the OCF, we will use the tax shield approach, so the cash flow each year is:OCF = (Sales – Costs)(1 – t C) + t C DepreciationYear Cash Flow0 – R3,000,000 = –R2.7M – 300K1 1,277,730.00 = (R1,440,000)(.70) + 0.30(R899,100)2 1,367,640.00 = (R1,440,000)(.70) + 0.30(R1,198,800)3 1,635,630.00 = (R1,440,000)(.70) + 0.30(R399,600) + R207,750 + 300,000Remember to include the NWC cost in Year 0, and the recovery of the NWC at the end of the project.The NPV of the project with these assumptions is:NPV = – R3.0M + (R1,277,730/1.15) + (R1,367,640/1.152) + (R1,635,630/1.153)NPV = R220,655.206. First, we will calculate the annual depreciation of the new equipment. It will be:Annual depreciation charge = €925,000/5Annual depreciation charge = €185,000The aftertax salvage value of the equipment is:Aftertax salvage value = €90,000(1 – 0.35)Aftertax salvage value = €58,500Using the tax shield approach, the OCF is:OCF = €360,000(1 – 0.35) + 0.35(€185,000)OCF = €298,750Now we can find the project IRR. There is an unusual feature that is a part of this project. Accepting this project means that we will reduce NWC. This reduction in NWC is a cash inflow at Year 0. This reduction in NWC implies that when the project ends, we will have to increase NWC. So, at the end of the project, we will have a cash outflow to restore the NWC to its level before the project. We also must include the aftertax salvage value at the end of the project. The IRR of the project is:NPV = 0 = –€925,000 + 125,000 + €298,750(PVIFA IRR%,5) + [(€58,500 – 125,000) / (1+IRR)5]IRR = 23.85%7.First, we will calculate the annual depreciation of the new equipment. It will be:Annual depreciation = £390,000/5Annual depreciation = £78,000Now, we calculate the aftertax salvage value. The aftertax salvage value is the market price minus (or plus) the taxes on the sale of the equipment, so:Aftertax salvage value = MV + (BV – MV)t cVery often, the book value of the equipment is zero as it is in this case. If the book value is zero, the equation for the aftertax salvage value becomes:Aftertax salvage value = MV + (0 – MV)t cAftertax salvage value = MV(1 – t c)We will use this equation to find the aftertax salvage value since we know the book value is zero. So, the aftertax salvage value is:Aftertax salvage value = £60,000(1 – 0.34)Aftertax salvage value = £39,600Using the tax shield approach, we find the OCF for the project is:OCF = £120,000(1 – 0.34) + 0.34(£78,000)OCF = £105,720Now we can find the project NPV. Notice that we include the NWC in the initial cash outlay. The recovery of the NWC occurs in Year 5, along with the aftertax salvage value.NPV = –£390,000 – 28,000 + £105,720(PVIFA10%,5) + [(£39,600 + 28,000) / 1.15]NPV = £24,736.268.To find the BV at the end of four years, we need to find the accumulated depreciation for the firstfour years. We could calculate a table with the depreciation each year, but an easier way is to add the MACRS depreciation amounts for each of the first four years and multiply this percentage times the cost of the asset. We can then subtract this from the asset cost. Doing so, we get:BV4 = $9,300,000 – 9,300,000(0.2000 + 0.3200 + 0.1920 + 0.1150)BV4 = $1,608,900The asset is sold at a gain to book value, so this gain is taxable.Aftertax salvage value = $2,100,000 + ($1,608,900 – 2,100,000)(.40)Aftertax salvage value = $1,903,5609. We will begin by calculating the initial cash outlay, that is, the cash flow at Time 0. To undertake theproject, we will have to purchase the equipment and increase net working capital. So, the cash outlay today for the project will be:Equipment –€2,000,000NWC –100,000Total –€2,100,000Using the bottom-up approach to calculating the operating cash flow, we find the operating cash flow each year will be:Sales €1,200,000Costs 300,000Depreciation 500,000EBT €400,000Tax 140,000Net income €260,000The operating cash flow is:OCF = Net income + DepreciationOCF = €260,000 + 500,000OCF = €760,000To find the NPV of the project, we add the present value of the project cash flows. We must be sure to add back the net working capital at the end of the project life, since we are assuming the net working capital will be recovered. So, the project NPV is:NPV = –€2,100,000 + €760,000(PVIFA14%,4) + €100,000 / 1.144NPV = €173,629.3810.We will need the aftertax salvage value of the equipment to compute the EAC. Even though theequipment for each product has a different initial cost, both have the same salvage value. The aftertax salvage value for both is:Both cases: aftertax salvage value = $20,000(1 – 0.35) = $13,000To calculate the EAC, we first need the OCF and NPV of each option. The OCF and NPV for Techron I is:OCF = – $34,000(1 – 0.35) + 0.35($210,000/3) = $2,400NPV = –$210,000 + $2,400(PVIFA14%,3) + ($13,000/1.143) = –$195,653.45EAC = –$195,653.45 / (PVIFA14%,3) = –$84,274.10And the OCF and NPV for Techron II is:OCF = – $23,000(1 – 0.35) + 0.35($320,000/5) = $7,450NPV = –$320,000 + $7,450(PVIFA14%,5) + ($13,000/1.145) = –$287,671.75EAC = –$287,671.75 / (PVIFA14%,5) = –$83,794.05The two milling machines have unequal lives, so they can only be compared by expressing both on an equivalent annual basis, which is what the EAC method does. Thus, you prefer the Techron II because it has the lower (less negative) annual cost.。
(完整word版)罗斯公司理财题库全集(word文档良心出品)
Chapter 21Leasing Multiple Choice Questions1. In a lease arrangement, the owner of the asset is:A. the lesser.B. the lessee.C. the lessor.D. the leaser.E. None of the above.2. In a lease arrangement, the user of the asset is:A. the lesser.B. the lessee.C. the lessor.D. the leaser.E. None of the above.3. Which of the following would not be a characteristic of a financial lease?A. They are not usually fully amortized.B. They usually do not have maintenance necessary for the leased assets.C. They usually do not include a cancellation option.D. The lessee usually has the right to renew the lease at expiration.E. All of the above are characteristics of financial leases.4. An independent leasing company supplies ___________ leases versus the manufacturer who supplies ________________ leases.A. leveraged; directB. sales and leaseback; sales-typeC. capital; sales-typeD. direct; sales-typeE. None of the above5. Which of the following is not a financial lease?A. A leveraged leaseB. An operating leaseC. A sale-and-leasebackD. Both A and B.E. None of the above.6. If the lessor borrows much of the purchase price of a leased asset, the lease is called:A. a leveraged lease.B. a sale-and-leaseback.C. a capital lease.D. a nonrecourse lease.E. None of the above.7. An operating lease's primary characteristics are:A. fully amortized, lessee maintains equipment and there is no cancellation clause.B. not fully amortized, lessor maintains equipment and there is a cancellation clause.C. fully amortized, lessor maintains equipment and there is a cancellation clause.D. not fully amortized, lessor maintains equipment and there is not cancellation clause.E. fully amortized, lessee maintains equipment and lessee can acquire assets at end of lease for fair market value.8. If a lease is for 35 years, it is regarded as a:A. financial lease.B. operating lease.C. capital lease.D. conditional sale.E. sale and leaseback.9. The city of Oakland sold some buildings and used the proceeds to improve its financial position. The city then leased the buildings back in order to continue to use these facilities. This is an example of:A. an operating lease.B. a short-term lease.C. a sale and leaseback.D. a fully amortized lease.E. None of the above.10. A financial lease has the following as its primary characteristics:A. is fully amortized, lessee maintains equipment and there is no renewal clause and no cancellation clause.B. is not fully amortized, lessor maintains equipment and there is a renewal clause but no cancellation clause.C. is fully amortized, lessor maintains equipment and there is a renewal clause and a no cancellation clause.D. is not fully amortized, lessor maintains equipment and there is a renewal clause.E. is fully amortized, lessee maintains equipment and there is a renewal clause and a no cancellation clause.11. An advantage of leasing is that the lessor does not own the asset and can cancel:A. only financial leases.B. only operating leases.C. only capital leases.D. any kind of leases anytime.E. None of the above.12. A leveraged lease typically involves a non-recourse loan in which:A. the lessee's payments go directly to the lender in case of default.B. the lessor is not obligated in case of default.C. the third party lenders have a first lien on the assets.D. All of the above.E. None of the above.13. For accounting purposes, which of the following conditions would automatically cause a lease to be a capital lease?A. The lessee can purchase the asset below fair market value at the end of the lease.B. The lease transfers ownership of the asset to the lessee by the end of the lease.C. The lease term is more than 75% of the asset's economic life.D. The present value of the lease payments is more than 90% of the asset's market value at lease inception.E. All of the above would lead to the lease being considered a capital lease.14. Capital leases would show up on the balance sheet of the firm in which manner for a six year machinery lease worth $700,000?A. Capital leases do not have to be put on the balance sheet; only financial leases do.B. Asset - Machinery $700,000; Liabilities - Long Term debt $700,000 because of debt displacement.C. Asset - Assets under Capital Lease $700,000; Liabilities - Obligations under Capital Lease $700,000.D. Assets - Assets under Capital Lease $700,000; Liabilities - Long Term Debt $700,000 because of debt displacement.E. None of the above.15. Prior to FASB 13, "Accounting for Leases", lease activity was only reported in financial footnotes. This off-balance-sheet-financing made firms with:A. capital leases appear financially stronger than firms that used debt to purchase the asset.B. operating leases appear financially stronger than firms that used debt to purchase the asset.C. leases of any type appear financially stronger than firms that used debt to purchase the asset.D. All of the above.E. None of the above.16. Which of the following is not an implication of FASB 13, Accounting for Leases?A. FASB 13 requires that the PV of the lease payments appear on the right hand side of the balance sheet.B. FASB 13 requires that the present value of the asset appear on the left hand side of the balance sheet.C. FASB 13 allows for off-balance-sheet financing for operating leases.D. All of the above.E. None of the above.17. The reason the IRS is most concerned about lease contracts is:A. firms that lease generally pay no taxes.B. that leasing usually leads to bankruptcy.C. that leases can be set up solely to avoid taxes.D. because leasing leads to off-balance-sheet-financing.E. All of the above.18. A lease with high payments early in its life which then decline to termination would:A. provide greater cash flow to the lessee in the beginning years.B. be evidence of tax avoidance and not acceptable to the IRS.C. be qualified as a capital lease under FASB 13.D. provide a lower residual value and thus ensure a bargain-purchase price option.E. All of the above.19. In valuing the lease versus purchase option, the relevant cash flows are the:A. tax shield from depreciation.B. investment outlay for the equipment.C. a decrease in the firm's operating costs that are not affected by leasing.D. All of the above are relevant.E. None of the above are relevant.20. The appropriate discount rate for valuing a financial lease is:A. the firm's after-tax weighted average cost of capital.B. the after-tax required return on assets of risks similar to the leased asset.C. the after-tax cost of secured borrowing.D. Either A or B.E. All of the above.21. The WACC is not used in the lease versus purchase decision because:A. the WACC was used in the decision to acquire the asset, this is only a financing decision.B. the WACC is used only when a lease alone is considered and not a lease versus purchase.C. the WACC does not include the lease cost of capital and therefore should not be used.D. tax rates of the lessor may be different than the lessee and therefore the WACC is incorrect.E. when a bank arranges a lease they do not consider the lessee's cost of capital.22. Firms that use financial leases must consider their debt-to-equity ratios as inadequate measures of financial leverage because:A. lenders are concerned about the firm's total liabilities and related cash flow.B. debt displacement occurs with leasing.C. less future debt can be raised for a growing firm when a lease is used.D. All of the above.E. None of the above.23. ______ would be evidence the lease is being used to avoid taxes and not a legitimate business purpose.A. Early balloon paymentsB. Late balloon paymentsC. Capitalizing a leaseD. Transfer of lease payments to a second ownerE. None of the above24. Debt displacement is associated with leases because:A. all assets not purchased with equity use debt financing.B. debt is always a cheaper source of financing and preferred to equity financing.C. FASB 13 and the IRS mandate debt displacement.D. lease financing is all debt and causes an imbalance in the optimal debt to equity ratio which reduces future debt financing.E. None of the above.25. A lease is likely to be most beneficial to both parties when:A. the lessor's tax rate is lower than the lessee's.B. the lessor's tax rate is higher than the lessee's.C. the lessor's tax rate is equal to the lessee's.D. a lease cannot be beneficial to both parties.E. a lease always has zero NPV, so both parties always break even.26. The price or lease payment that the lessee sets as their bound is known as:A. the present value of the tax shields.B. the reservation payment, L MIN.C. the present value of operating savings.D. the reservation payment, L MAX.E. None of the above.27. Which of the following is probably not a good reason for leasing instead of buying?A. Taxes may be reduced by leasing.B. Leasing may reduce transactions costs.C. Leasing may provide a beneficial reduction of uncertainty.D. All of the above are good reasons.E. All of the above are not good reasons.28. Which of the following is probably a good reason for leasing instead of buying?A. Leasing provides 100% financing.B. Leasing is not considered a form of debt financing.C. Leasing may increase EPS relative to buying.D. All of the above are good reasons.E. None of the above is a good reason.29. Some assets are leased more than others because:A. the value of the asset under a lease is not highly affected by term of use or maintenance decisions.B. a lease may be used to fool clients into "buying" high priced assets above market value.C. leasing allows sellers to attract clients with low prices as the basis for setting the contract.D. Both A and B.E. Both A and C.30. To meet IRS guidelines for leasing, the lease should:A. limit the lessee's right to issue debt or pay dividends while the lease is operative.B. not limit the lessee's right to issue debt or pay dividends while the lease is operative.C. pay a very high return to the lessor.D. transfer ownership of the asset at the end of the lease at below fair market value.E. be over 30 years.Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciated to a zero salvage value over 9 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 8%. The corporate tax rate is 30%.31. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-9?A. $-255B. $-955C. $-1,295D. $-1,850E. None of the above32. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?A. $-4,865B. $-700C. $6,950D. $7,650E. None of the above33. What is the NPV of the lease relative to the purchase?A. $-1,039.78B. $339.78C. $360.22D. $6,610.22E. None of the above34. What would the after-tax cash flow in year 9 be if the asset had a residual value of $500 (ignoring any possible risk differences)?A. $-605B. $-955C. $-1,455D. $-1,305E. None of the above35. This lease would be classified as a(n):A. operating lease because the asset will be obsolete.B. operating lease because there is no amortization.C. leveraged lease because it is being financed.D. capital lease because the lease life is greater than 75% of the economic life.E. sale and leaseback because the company gets full use of the asset.Your firm is considering leasing a new robotic milling control system. The lease lasts for 5 years. The lease calls for 6 payments of $300,000 per year with the first payment occurring at lease inception. The system would cost $1,050,000 to buy and would be straight-line depreciated to a zero salvage value. The actual salvage value is zero. The firm can borrow at 8%, and the corporate tax rate is 34%.36. What is the appropriate discount rate for valuing the lease?A. 2.72%B. 5.28%C. 8.00%D. 12.12%E. None of the above.37. What is the after-tax cash flow from leasing in year 0?A. $300,000B. $495,000C. $852,000D. $948,000E. None of the above38. What is the after-tax cash flow in years 1 through 5?A. $-126,600B. $-198,000C. $-269,400D. $-287,250E. None of the above39. What is the NPV of the lease?A. $-111,690B. $-295,040C. $-305,388D. $-309,690E. None of the above40. What is the maximum lease payment that you would be willing to make?A. $170,655B. $175,000C. $187,842D. $210,307E. None of the above41. What is the minimum lease payment that the lessor would be willing to accept?A. $161,000B. $176,995C. $217,645D. $237,083E. None of the aboveYour firm is considering leasing a new laser light. The lease lasts for 3 years. The lease calls for 4 payments of $10,000 per year with the first payment occurring immediately. The computer would cost $45,000 to buy and would be straight-line depreciated to a zero salvage value over 3 years. The actual salvage value is negligible because of technological obsolescence. The firm can borrow at a rate of 10%. The corporate tax rate is 35%.42. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in years 1-3?A. $-32,775B. $-11,750C. $-1,750D. $-1,850E. None of the above43. What is the after-tax cash flow from leasing relative to the after-tax cash flow from purchasing in year 0?A. $-35,000B. $-38,500C. $35,000D. $38,500E. None of the above44. What is the NPV of the lease relative to the purchase?A. $-6,500B. $7,380C. $4,678D. $12,400E. None of the above45. What would the after-tax cash flow in year 3 be if the asset had a residual value of $1,000 (ignoring any possible risk differences)?A. $-11,750B. $11,750C. $12,400D. $-12,400E. None of the above46. This lease would be classified as a(n):A. operating lease because the asset will be obsolete.B. operating lease because there is no amortization.C. leveraged lease because it is being financed.D. capital lease because the lease life is greater than 75% of the economic life.E. sale and leaseback because the company gets full use of the asset.Essay Questions47. Sardinas Sardines has assets valued at $10 million and equity of $10 million. The firm recently leased new equipment worth $1 million. Present the balance sheet under two conditions; the lease is judged to be an operating lease, and the lease is judged to be a capital lease.48. The Blank Button Company is considering the purchase of a new machine for $30,000. The machine is expected to save the firm $12,500 per year in operating costs over a 5 year period, and can be depreciated on a straight-line basis to a zero salvage value over its life. Alternatively, the firm can lease the machine for $6,500 per year for 5 years, with the first payment due in 1 year. The firm's tax rate is 34%, and its cost of debt is 10%. Calculate the NPV of the lease versus the purchase decision. Calculate the reservation payment of the lessee.49. The Plastic Iron Company has decided to acquire a new electronic milling machine. Plastic Iron can purchase the machine for $87,000 which has an expected life of 8 years and will be depreciated using 7 class MACRS rates of .1428, .2449, .1749, .125, .0892, .0892, .0892 and any remainder in year 8. Miller Leasing has offered to lease the machine to Plastic Iron for $14,000 a year for 8 years. Plastic Iron has an 18.64% cost of equity, 12% cost of debt, a 1:1 D/E ratio and faces a 34% marginal tax rate. Should they lease or buy? Show all work.50. What are some of the advantages and disadvantages of leasing?Chapter 21 Leasing Answer KeyMultiple Choice Questions1. In a lease arrangement, the owner of the asset is:A. the lesser.B. the lessee.C. the lessor.D. the leaser.E. None of the above.Difficulty level: EasyTopic: LESSORType: DEFINITIONS2. In a lease arrangement, the user of the asset is:A. the lesser.B. the lessee.C. the lessor.D. the leaser.E. None of the above.Difficulty level: EasyTopic: LESSEEType: DEFINITIONS3. Which of the following would not be a characteristic of a financial lease?A. They are not usually fully amortized.B. They usually do not have maintenance necessary for the leased assets.C. They usually do not include a cancellation option.D. The lessee usually has the right to renew the lease at expiration.E. All of the above are characteristics of financial leases.Difficulty level: MediumTopic: FINANCIAL LEASEType: DEFINITIONS4. An independent leasing company supplies ___________ leases versus the manufacturer who supplies ________________ leases.A. leveraged; directB. sales and leaseback; sales-typeC. capital; sales-typeD. direct; sales-typeE. None of the aboveDifficulty level: EasyTopic: TYPES OF LEASESType: DEFINITIONS5. Which of the following is not a financial lease?A. A leveraged leaseB. An operating leaseC. A sale-and-leasebackD. Both A and B.E. None of the above.Difficulty level: EasyTopic: TYPES OF LEASESType: DEFINITIONS6. If the lessor borrows much of the purchase price of a leased asset, the lease is called:A. a leveraged lease.B. a sale-and-leaseback.C. a capital lease.D. a nonrecourse lease.E. None of the above.Difficulty level: EasyTopic: TYPES OF LEASESType: DEFINITIONS7. An operating lease's primary characteristics are:A. fully amortized, lessee maintains equipment and there is no cancellation clause.B. not fully amortized, lessor maintains equipment and there is a cancellation clause.C. fully amortized, lessor maintains equipment and there is a cancellation clause.D. not fully amortized, lessor maintains equipment and there is not cancellation clause.E. fully amortized, lessee maintains equipment and lessee can acquire assets at end of lease for fair market value.Difficulty level: MediumTopic: OPERATING LEASEType: DEFINITIONS8. If a lease is for 35 years, it is regarded as a:A. financial lease.B. operating lease.C. capital lease.D. conditional sale.E. sale and leaseback.Difficulty level: MediumTopic: TYPES OF LEASESType: DEFINITIONS9. The city of Oakland sold some buildings and used the proceeds to improve its financial position. The city then leased the buildings back in order to continue to use these facilities. This is an example of:A. an operating lease.B. a short-term lease.C. a sale and leaseback.D. a fully amortized lease.E. None of the above.Difficulty level: EasyTopic: TYPES OF LEASEType: CONCEPTS10. A financial lease has the following as its primary characteristics:A. is fully amortized, lessee maintains equipment and there is no renewal clause and no cancellation clause.B. is not fully amortized, lessor maintains equipment and there is a renewal clause but no cancellation clause.C. is fully amortized, lessor maintains equipment and there is a renewal clause and a no cancellation clause.D. is not fully amortized, lessor maintains equipment and there is a renewal clause.E. is fully amortized, lessee maintains equipment and there is a renewal clause and a no cancellation clause.Difficulty level: EasyTopic: FINANCIAL LEASEType: CONCEPTS11. An advantage of leasing is that the lessor does not own the asset and can cancel:A. only financial leases.B. only operating leases.C. only capital leases.D. any kind of leases anytime.E. None of the above.Difficulty level: EasyTopic: ADVANTAGE TO LEASINGType: CONCEPTS12. A leveraged lease typically involves a non-recourse loan in which:A. the lessee's payments go directly to the lender in case of default.B. the lessor is not obligated in case of default.C. the third party lenders have a first lien on the assets.D. All of the above.E. None of the above.Difficulty level: MediumTopic: LEVERAGED LEASEType: CONCEPTS13. For accounting purposes, which of the following conditions would automatically cause a lease to be a capital lease?A. The lessee can purchase the asset below fair market value at the end of the lease.B. The lease transfers ownership of the asset to the lessee by the end of the lease.C. The lease term is more than 75% of the asset's economic life.D. The present value of the lease payments is more than 90% of the asset's market value at lease inception.E. All of the above would lead to the lease being considered a capital lease.Difficulty level: MediumTopic: CAPITAL LEASEType: CONCEPTS14. Capital leases would show up on the balance sheet of the firm in which manner for a six year machinery lease worth $700,000?A. Capital leases do not have to be put on the balance sheet; only financial leases do.B. Asset - Machinery $700,000; Liabilities - Long Term debt $700,000 because of debt displacement.C. Asset - Assets under Capital Lease $700,000; Liabilities - Obligations under Capital Lease $700,000.D. Assets - Assets under Capital Lease $700,000; Liabilities - Long Term Debt $700,000 because of debt displacement.E. None of the above.Difficulty level: EasyTopic: CAPITAL LEASEType: CONCEPTS15. Prior to FASB 13, "Accounting for Leases", lease activity was only reported in financial footnotes. This off-balance-sheet-financing made firms with:A. capital leases appear financially stronger than firms that used debt to purchase the asset.B. operating leases appear financially stronger than firms that used debt to purchase the asset.C. leases of any type appear financially stronger than firms that used debt to purchase the asset.D. All of the above.E. None of the above.Difficulty level: ChallengeTopic: FASB 13Type: CONCEPTS16. Which of the following is not an implication of FASB 13, Accounting for Leases?A. FASB 13 requires that the PV of the lease payments appear on the right hand side of the balance sheet.B. FASB 13 requires that the present value of the asset appear on the left hand side of the balance sheet.C. FASB 13 allows for off-balance-sheet financing for operating leases.D. All of the above.E. None of the above.Difficulty level: MediumTopic: FASB 13Type: CONCEPTS17. The reason the IRS is most concerned about lease contracts is:A. firms that lease generally pay no taxes.B. that leasing usually leads to bankruptcy.C. that leases can be set up solely to avoid taxes.D. because leasing leads to off-balance-sheet-financing.E. All of the above.Difficulty level: EasyTopic: TAX IMPLICATIONSType: CONCEPTS18. A lease with high payments early in its life which then decline to termination would:A. provide greater cash flow to the lessee in the beginning years.B. be evidence of tax avoidance and not acceptable to the IRS.C. be qualified as a capital lease under FASB 13.D. provide a lower residual value and thus ensure a bargain-purchase price option.E. All of the above.Difficulty level: MediumTopic: TAX IMPLICATIONSType: CONCEPTS19. In valuing the lease versus purchase option, the relevant cash flows are the:A. tax shield from depreciation.B. investment outlay for the equipment.C. a decrease in the firm's operating costs that are not affected by leasing.D. All of the above are relevant.E. None of the above are relevant.Difficulty level: MediumTopic: LEASE VS. BUYType: CONCEPTS20. The appropriate discount rate for valuing a financial lease is:A. the firm's after-tax weighted average cost of capital.B. the after-tax required return on assets of risks similar to the leased asset.C. the after-tax cost of secured borrowing.D. Either A or B.E. All of the above.Difficulty level: EasyTopic: APPROPRIATE DISCOUNT RATEType: CONCEPTS21. The WACC is not used in the lease versus purchase decision because:A. the WACC was used in the decision to acquire the asset, this is only a financing decision.B. the WACC is used only when a lease alone is considered and not a lease versus purchase.C. the WACC does not include the lease cost of capital and therefore should not be used.D. tax rates of the lessor may be different than the lessee and therefore the WACC is incorrect.E. when a bank arranges a lease they do not consider the lessee's cost of capital.Difficulty level: ChallengeTopic: APPROPRIATE DISCOUNT RATEType: CONCEPTS22. Firms that use financial leases must consider their debt-to-equity ratios as inadequate measures of financial leverage because:A. lenders are concerned about the firm's total liabilities and related cash flow.B. debt displacement occurs with leasing.C. less future debt can be raised for a growing firm when a lease is used.D. All of the above.E. None of the above.Difficulty level: MediumTopic: FINANCIAL LEASEType: CONCEPTS23. ______ would be evidence the lease is being used to avoid taxes and not a legitimate business purpose.A. Early balloon paymentsB. Late balloon paymentsC. Capitalizing a leaseD. Transfer of lease payments to a second ownerE. None of the aboveDifficulty level: MediumTopic: TAX IMPLICATIONSType: CONCEPTS24. Debt displacement is associated with leases because:A. all assets not purchased with equity use debt financing.B. debt is always a cheaper source of financing and preferred to equity financing.C. FASB 13 and the IRS mandate debt displacement.D. lease financing is all debt and causes an imbalance in the optimal debt to equity ratio which reduces future debt financing.E. None of the above.Difficulty level: ChallengeTopic: LEASES AND DEBTType: CONCEPTS25. A lease is likely to be most beneficial to both parties when:A. the lessor's tax rate is lower than the lessee's.B. the lessor's tax rate is higher than the lessee's.C. the lessor's tax rate is equal to the lessee's.D. a lease cannot be beneficial to both parties.E. a lease always has zero NPV, so both parties always break even.Difficulty level: ChallengeTopic: TAX IMPLICATIONSType: CONCEPTS26. The price or lease payment that the lessee sets as their bound is known as:A. the present value of the tax shields.B. the reservation payment, L MIN.C. the present value of operating savings.D. the reservation payment, L MAX.E. None of the above.Difficulty level: MediumTopic: RESERVATION PAYMENTType: CONCEPTS27. Which of the following is probably not a good reason for leasing instead of buying?A. Taxes may be reduced by leasing.B. Leasing may reduce transactions costs.C. Leasing may provide a beneficial reduction of uncertainty.D. All of the above are good reasons.E. All of the above are not good reasons.Difficulty level: MediumTopic: REASON FOR LEASINGType: CONCEPTS。
罗斯公司理财题库全集
Chapter 19 Dividends and Other Payouts Answer KeyMultiple Choice Questions1. Payments made out of a firm's earnings to its owners in the form of cash or stock are called:A. dividends.B. distributions.C. share repurchases.D. payments-in-kind.E. stock splits.Difficulty level: EasyTopic: DIVIDENDSType: DEFINITIONS2. Payments made by a firm to its owners from sources other than current or accumulated earnings are called:A. dividends.B. distributions.C. share repurchases.D. payments-in-kind.E. stock splits.Difficulty level: EasyTopic: DISTRIBUTIONSType: DEFINITIONS3. A cash payment made by a firm to its owners in the normal course of business is called a:A. share repurchase.B. liquidating dividend.C. regular cash dividend.D. special dividend.E. extra cash dividend.Difficulty level: EasyTopic: REGULAR CASH DIVIDENDSType: DEFINITIONS4. A cash payment made by a firm to its owners when some of the firm's assets are sold off is called a:A. liquidating dividend.B. regular cash dividend.C. special dividend.D. extra cash dividend.E. share repurchase.Difficulty level: EasyTopic: LIQUIDATING DIVIDENDSType: DEFINITIONS5. The date on which the board of directors passes a resolution authorizing payment of a dividend to the shareholders is the _____ date.A. ex-rightsB. ex-dividendC. recordD. paymentE. declarationDifficulty level: EasyTopic: DECLARATION DATEType: DEFINITIONS6. The date before which a new purchaser of stock is entitled to receive a declared dividend, but on or after which she does not receive the dividend, is called the _____ date.A. ex-rightsB. ex-dividendC. recordD. paymentE. declarationDifficulty level: EasyTopic: EX-DIVIDEND DATEType: DEFINITIONS7. The date by which a stockholder must be registered on the firm's roll as having share ownership in order to receive a declared dividend is called the:A. ex-rights date.B. ex-dividend date.C. date of record.D. date of payment.E. declaration date.Difficulty level: EasyTopic: DATE OF RECORDType: DEFINITIONS8. The date on which the firm mails out its declared dividends is called the:A. ex-rights date.B. ex-dividend date.C. date of record.D. date of payment.E. declaration date.Difficulty level: EasyTopic: DATE OF PAYMENTType: DEFINITIONS9. The ability of shareholders to undo the dividend policy of the firm and create an alternative dividend payment policy via reinvesting dividends or selling shares of stock is called (a):A. perfect foresight model.B. MM Proposition I.C. capital structure irrelevancy.D. homemade leverage.E. homemade dividends.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: DEFINITIONS10. The market's reaction to the announcement of a change in the firm's dividend payout is likely the:A. information content effect.B. clientele effect.C. efficient markets hypothesis.D. MM Proposition I.E. MM Proposition II.Difficulty level: MediumTopic: INFORMATION CONTENT EFFECTType: DEFINITIONS11. The observed empirical fact that stocks attract particular investors based on the firm's dividend policy and the resulting tax impact on investors is called the:A. information content effect.B. clientele effect.C. efficient markets hypothesis.D. MM Proposition I.E. MM Proposition II.Difficulty level: EasyTopic: CLIENTELE EFFECTType: DEFINITIONS12. A _____ is an alternative method to cash dividends which is used to pay out a firm's earnings to shareholders.A. mergerB. acquisitionC. payment-in-kindD. stock splitE. share repurchaseDifficulty level: EasyTopic: SHARE REPURCHASEType: DEFINITIONS13. A payment made by a firm to its owners in the form of new shares of stock is called a _____ dividend.A. stockB. normalC. specialD. extraE. liquidatingDifficulty level: EasyTopic: STOCK DIVIDENDSType: DEFINITIONS14. An increase in a firm's number of shares outstanding without any change in owners' equity is called a:A. special dividend.B. stock split.C. share repurchase.D. tender offer.E. liquidating dividend.Difficulty level: EasyTopic: STOCK SPLITSType: DEFINITIONS15. The difference between the highest and lowest prices at which a stock has traded is called its:A. average price.B. bid-ask spread.C. trading range.D. opening price.E. closing price.Difficulty level: EasyTopic: TRADING RANGEType: DEFINITIONS16. In a reverse stock split:A. the number of shares outstanding increases and owners' equity decreases.B. the firm buys back existing shares of stock on the open market.C. the firm sells new shares of stock on the open market.D. the number of shares outstanding decreases but owners' equity is unchanged.E. shareholders make a cash payment to the firm.Difficulty level: EasyTopic: REVERSE SPLITSType: DEFINITIONS17. The last date on which you can purchase shares of stock and still receive the dividend is the date _____ business day(s) prior to the date of record.A. zeroB. oneC. threeD. fiveE. sevenDifficulty level: EasyTopic: DIVIDEND PAYMENTSType: CONCEPTS18. Leslie purchased 100 shares of GT, Inc. stock on Wednesday, June 7th. Marti purchased 100 shares of GT, Inc. stock on Thursday, July 8th. GT declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st. Which one of the following statements concerning the dividend paid on August 1st is correct given this information?A. Neither Leslie nor Marti are entitled to the dividend.B. Leslie is entitled to the dividend but Marti is not.C. Marti is entitled to the dividend but Leslie is not.D. Both Marti and Leslie are entitled to the dividend.E. Both Marti and Leslie are entitled to one-half of the dividend amount.Difficulty level: MediumTopic: DIVIDEND PAYMENTSType: CONCEPTS19. All else equal, the market value of a stock will tend to decrease by roughly the amount of the dividend on the:A. dividend declaration date.B. ex-dividend date.C. date of record.D. date of payment.E. day after the date of payment.Difficulty level: MediumTopic: DIVIDEND PAYMENTSType: CONCEPTS20. Which one of the following is an argument in favor of a low dividend policy?A. the tax on capital gains is deferred until the gain is realizedB. few, if any, positive net present value projects are available to the firmC. a preponderance of stockholders have minimal taxable incomeD. a majority of stockholders have other investment opportunities that offer higher rewards with similar risk characteristicsE. corporate tax rates exceed personal tax ratesDifficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS21. The fact that flotation costs can be significant is justification for:A. a firm to issue larger dividends than its closest competitors.B. a firm to maintain a constant dividend policy even if it frequently has to issue new shares of stock to do so.C. maintaining a constant dividend policy even when profits decline significantly.D. maintaining a high dividend policy.E. maintaining a low dividend policy and rarely issuing extra dividends.Difficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS22. Which of the following may tend to keep dividends low?I. a state law restricting dividends in excess of retained earningsII. a term contained in bond indenture agreementsIII. the desire to maintain constant dividends over timeIV. flotation costsA. II and III onlyB. I and IV onlyC. II, III, and IV onlyD. I, II, and III onlyE. I, II, III, and IVDifficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS23. Ignoring capital gains as an alternative, the tax law changes in 2003 tend to favor a:A. lower dividend policy.B. constant dividend policy.C. zero-dividend policy.D. higher dividend policy.E. restrictive dividend policy.Difficulty level: EasyTopic: FACTORS FOR HIGH DIVIDENDSType: CONCEPTS24. Which of the following are factors that favor a high dividend policy?I. stockholders desire for current incomeII. tendency for higher stock prices for high dividend paying firmsIII. investor dislike of uncertaintyIV. high percentage of tax-exempt institutional stockholdersA. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: FACTORS FOR HIGH DIVIDENDSType: CONCEPTS25. An investor is more likely to prefer a high dividend payout if a firm:A. has high flotation costs.B. has few, if any, positive net present value projects.C. has lower tax rates than the investor.D. has a stock price that is increasing rapidly.E. offers high capital gains which are taxed at a favorable rate.Difficulty level: EasyTopic: FACTORS FOR HIGH DIVIDENDSType: CONCEPTS26. The information content of a dividend increase generally signals that:A. the firm has a one-time surplus of cash.B. the firm has few, if any, net present value projects to pursue.C. management believes that the future earnings of the firm will be strong.D. the firm has more cash than it needs due to sales declines.E. future dividends will be lower.Difficulty level: MediumTopic: INFORMATION CONTENTType: CONCEPTS27. Of the following factors, which one is considered to be the primary factor affecting a firm's dividend decision?A. personal taxes of company stockholdersB. consistent dividend policyC. attracting retail investorsD. attracting institutional investorsE. sustainable changes in earningsDifficulty level: MediumTopic: DIVIDEND SURVEY RESULTSType: CONCEPTS28. Financial managers:A. are reluctant to cut dividends.B. tend to ignore past dividend policies.C. tend to prefer cutting dividends every time quarterly earnings decline.D. prefer cutting dividends over incurring flotation costs.E. place little emphasis on dividend policy consistency.Difficulty level: EasyTopic: DIVIDEND SURVEY RESULTSType: CONCEPTS29. If you ignore taxes and transaction costs, a stock repurchase will:I. reduce the total assets of a firm.II. increase the earnings per share.III. reduce the PE ratio more than an equivalent stock dividend.IV. reduce the total equity of a firm.A. I and III onlyB. II and IV onlyC. I, II, and IV onlyD. I, III, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: STOCK REPURCHASEType: CONCEPTS30. From a tax-paying investor's point of view, a stock repurchase:A. is equivalent to a cash dividend.B. is more desirable than a cash dividend.C. has the same tax effects as a cash dividend.D. is more highly taxed than a cash dividend.E. creates a tax liability even if the investor does not sell any of the shares he owns.Difficulty level: MediumTopic: STOCK REPURCHASEType: CONCEPTS31. All else equal, a stock dividend will _____ the number of shares outstanding and _____ the value per share.A. increase; increaseB. increase; decreaseC. not change; increaseD. decrease; increaseE. decrease; decreaseDifficulty level: EasyTopic: STOCK DIVIDENDSType: CONCEPTS32. A small stock dividend is defined as a stock dividend of less than _____%.A. 10 to 15B. 15 to 20C. 20 to 25D. 25 to 30E. 30 to 35Difficulty level: EasyTopic: STOCK DIVIDENDSType: CONCEPTS33. Nu Tech, Inc. is a technology firm with good growth prospects. The firm wishes to do something to acknowledge the loyalty of its shareholders but needs all of its available cash to fund its rapid growth. The market price of its stock is currently trading in the middle of its preferred trading range. The firm could consider:A. issuing a liquidating dividend.B. a stock split.C. a reverse stock split.D. issuing a stock dividend.E. a special cash dividend.Difficulty level: MediumTopic: STOCK DIVIDENDType: CONCEPTS34. Which of the following are valid reasons for a firm to reduce or eliminate its cash dividends?I. The firm is on the verge of violating a bond restriction which requires a current ratio of 1.8 or higher.II. A firm has just received a patent on a new product for which there is strong market demand and it needs the funds to bring the product to the marketplace.III. The firm can raise new capital easily at a very low cost.IV. The tax laws have recently changed such that dividends are taxed at an investor's marginal rate while capital gains are tax exempt.A. I and III onlyB. II and IV onlyC. II, III, and IV onlyD. I, II, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: STOCK DIVIDENDSType: CONCEPTS35. A stock split:A. increases the total value of the common stock account.B. decreases the value of the retained earnings account.C. does not affect the total value of any of the equity accounts.D. increases the value of the capital in excess of par account.E. decreases the total owners' equity on the balance sheet.Difficulty level: MediumTopic: STOCK SPLITSType: CONCEPTS36. Stock splits are often used to:A. adjust the market price of a stock such that it falls within a preferred trading range.B. decrease the excess cash held by a firm.C. increase both the number of shares outstanding and the market price per share simultaneously.D. increase the total equity of a firm.E. adjust the debt-equity ratio such that it falls within a preferred range.Difficulty level: EasyTopic: STOCK SPLITSType: CONCEPTS37. Which of the following tend to increase the appeal of a firm's stock to the average investor?I. a cessation of dividends by a firm which has a long history of increasing dividendsII. the distribution of a special dividend by a dividend-paying firmIII. a reverse stock split for a low-priced stockIV. the declaration of a stock dividend by a growth firmA. I and III onlyB. II and IV onlyC. I, II, and IV onlyD. II, III, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: STOCK SPLITSType: CONCEPTS38. Wydex, Inc. stock is currently trading at $82 a share. The firm feels that its primary clientele can afford to spend between $2,000 and $2,500 to purchase a round lot of 100 shares. The firm should consider a:A. reverse stock split.B. liquidating dividend.C. stock dividend.D. stock split.E. special dividend.Difficulty level: MediumTopic: STOCK SPLITType: CONCEPTS39. A one-for-four reverse stock split will:A. increase the par value by 25%.B. increase the number of shares outstanding by 400%.C. increase the market value but not affect the par value per share.D. increase a $1 par value to $4.E. increase a $1 par value by $4.Difficulty level: MediumTopic: REVERSE STOCK SPLITSType: CONCEPTS40. A reverse stock split is sometimes used as a means of:A. decreasing the liquidity of a stock.B. decreasing the market value per share of stock.C. increasing the number of stockholders.D. keeping a firm's stock eligible for trading on a stock exchange.E. raising cash from current stockholders.Difficulty level: EasyTopic: REVERSE STOCK SPLITSType: CONCEPTS41. Which of the following lists events in chronological order from earliest to latest?A. date of record, declaration date, ex-dividend date.B. date of record, ex-dividend date, declaration date.C. declaration date, date of record, ex-dividend date.D. declaration date, ex-dividend date, date of record.E. ex-dividend date, date of record, declaration date.Difficulty level: MediumTopic: DIVIDEND DATESType: CONCEPTS42. In an efficient market, ignoring taxes and time value, the price of stock should:A. decrease by the amount of the dividend immediately on the declaration date.B. decrease by the amount of the dividend immediately on the ex-dividend date.C. increase by the amount of the dividend immediately on the declaration date.D. increase by the amount of the dividend immediately on the ex-dividend date.E. Both B and C.Difficulty level: MediumTopic: EX-DIVIDEND DATESType: CONCEPTS43. On the date of record the stock price drop is:A. a full adjustment for the dividend payment.B. a partial adjustment for the dividend payment because of the tax effect.C. zero because it happens on the ex-dividend date.D. zero because it happens on the payment date.E. None of the above.Difficulty level: MediumTopic: DATE OF RECORDType: CONCEPTS44. The use of homemade dividends allows stockholders to change the:A. return pattern of the firm by leveraging their position like the firm.B. cash payout received by selling off shares to receive current dividends or purchasing additional shares with the dividends, as desired.C. value of the company by sending dividend requirement letters to the home office of the corporation.D. Both A and C.E. Both B and C.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: CONCEPTS45. Homemade dividends are described by Modigliani and Miller to be the:A. dividend one pays oneself to avoid risky stocks.B. re-arrangement of the firm's dividend stream as management needs.C. re-arrangement of the firm's dividend stream by investors buying or selling their holdings in the stock.D. present value of all dividends to be paid.E. None of the above.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: CONCEPTS46. The dividend-irrelevance proposition of Miller and Modigliani depends on the following relationship between investment policy and dividend policy:A. The level of investment does not influence or matter to the dividend decision.B. Once dividend policy is set the investment decision can be made as desired.C. The investment policy is set before the dividend decision and not changed by dividend policy.D. Since dividend policy is irrelevant there is no relationship between investment policy and dividend policy.E. Miller and Modigliani were only concerned about capital structure.Difficulty level: MediumTopic: DIVIDEND IRRELEVANCEType: CONCEPTS47. Dividends are relevant and dividend policy irrelevant when:A. cash dividends are always constant and dividend policy is changed as management needs.B. cash dividends are increased for one year while others are held constant, thus causing an increase in stock price, and dividend policy establishes the trade-off between dividends at different dates.C. cash dividends are always constant and dividend policy establishes the trade-off between dividends at different dates.D. cash dividends are increased for one payment while others are held constant and dividend policy is changed as management needs.E. None of the above.Difficulty level: MediumTopic: DIVIDEND RELEVANCEType: CONCEPTS48. A reverse split is when:A. the stock price gets too high for investors to purchase in round lots.B. the stock becomes too liquid and highly marketable.C. the stock price moves into the popular trading range.D. several old shares, such as 4, are replaced by 1 new share.E. None of the above.Difficulty level: EasyTopic: REVERSE SPLITType: CONCEPTS49. A firm announces that it is willing to purchase a number of shares back at various prices and shareholders have the option to indicate how many shares they are willing to sell at various prices. This process is called a:A. dividend creation model.B. secondary market transaction.C. free market sale.D. Dutch auction.E. None of the above.Difficulty level: EasyTopic: DUTCH AUCTIONType: CONCEPTS50. Characteristics of a sensible dividend policy include:A. over time pay out all free cash flowsB. set the current regular dividend consistent with a long-run target payout ratioC. use repurchases to distribute transitory cash flow increasesD. A and BE. All of the aboveDifficulty level: EasyTopic: CHARACTERISTICS OF SENSIBLE DIVIDEND POLICYType: CONCEPTS51. You owned 200 shares last year and received a stock dividend of 5% at the end of last year. The number of shares you now have is _____ and your wealth has increased by ______%.A. 10; 5B. 210; 5C. 210; 0D. 50,000; 5E. 50,000; 0# shares = 200(1.05) = 210The only change is in value per share.Difficulty level: EasyTopic: STOCK DIVIDENDSType: PROBLEMS52. The Rent It Company declared a dividend of $.60 a share on October 20th to holders of record on Monday, November 1st. The dividend is payable on December 1st. You purchased 100 shares of Rent It Company stock on Wednesday, October 27th. How much dividend income will you receive on December 1st from the Rent It Company?A. $0B. $1.50C. $6.00D. $15.00E. $60.00Dividend received = $.60 ⨯ 100 = $60.00Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS53. You purchased 200 shares of ABC stock on July 15th. On July 20th, you purchased another 100 shares and then on July 22st you purchased your final 200 shares of ABC stock. The company declared a dividend of $1.10 a share on July 5th to holders of record on Friday, July 23rd. The dividend is payable on July 31st. How much dividend income will you receive on July 31st from ABC?A. $0B. $220C. $330D. $440E. $550Dividend received = $1.10 ⨯ (200 + 100) = $330Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS54. The KatyDid Co. is paying a $1.25 per share dividend today. There are 120,000 shares outstanding with a par value of $1.00 per share. As a result of this dividend, the:A. retained earnings will decrease by $150,000.B. retained earnings will decrease by $120,000.C. common stock account will decrease by $150,000.D. common stock account will decrease by $120,000.E. capital in excess of par value account will decrease by $120,000.Decrease in retained earnings = $1.25 ⨯ 120,000 = $150,000Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS55. On May 18th, you purchased 1,000 shares of BuyLo stock. On June 5th, you sold 200 shares of this stock for $21 a share. You sold an additional 400 shares on July 8th at a price of $22.50 a share. The company declared a $.50 per share dividend on June 25th to holders of record as of Thursday, July 10th. This dividend is payable on July 31st. How much dividend income will you receive on July 31st as a result of your ownership of BuyLo stock?A. $100B. $200C. $300D. $400E. $500Dividend received = $.50 ⨯ (1,000 - 200) = $400Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS56. You own 300 shares of Abco, Inc. stock. The company has stated that it plans on issuing a dividend of $.60 a share one year from today and then issuing a final liquidating dividend of $2.20 a share two years from today. Your required rate of return is 9%. Ignoring taxes, what is the value of one share of this stock today?A. $2.36B. $2.40C. $2.62D. $2.80E. $2.85Value per share = ($.60 ÷ 1.091) + ($2.20 ÷ 1.092) = $2.40Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: PROBLEMS57. Priscilla owns 500 shares of Delta stock. It is January 1, 2006, and the company recently issued a statement that it will pay a $1.00 per share dividend on December 31, 2006 and a $.50 per share dividend on December 31, 2007. Priscilla does not want any dividend this year but does want as much dividend income as possible next year. Her required return on this stock is 12%. Ignoring taxes, what will Priscilla's homemade dividend per share be in 2007?A. $0B. $.50C. $1.50D. $1.62E. $1.68Homemade dividend = ($1.00 ⨯ 1.12) + $.50 = $1.62Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: PROBLEMS58. A firm has a market value equal to its book value. Currently, the firm has excess cash of $600 and other assets of $5,400. Equity is worth $6,000. The firm has 500 shares of stock outstanding and net income of $900. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?A. $1.20B. $1.50C. $1.80D. $2.00E. $2.40Price per share = $6,000 ÷ 500 = $12; Number of shares repurchased = $600 ÷ $12 = 50 shares; New EPS = $900 ÷ (500 - 50) = $2.00Difficulty level: MediumTopic: STOCK REPURCHASEType: PROBLEMS59. A firm has a market value equal to its book value. Currently, the firm has excess cash of $800 and other assets of $5,200. Equity is worth $6,000. The firm has 600 shares of stock outstanding and net income of $700. The firm has decided to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?A. 480 sharesB. 500 sharesC. 520 sharesD. 540 sharesE. 560 sharesPrice per share = $6,000 ÷ 600 = $10; Number of shares repurchased = $800 ÷ $10 = 80; New number of shares outstanding = 600 - 80 = 520Difficulty level: MediumTopic: STOCK REPURCHASEType: PROBLEMS60. A firm has a market value equal to its book value. Currently, the firm has excess cash of $500 and other assets of $9,500. Equity is worth $10,000. The firm has 250 shares of stock outstanding and net income of $1,400. What will the stock price per share be if the firm pays out its excess cash as a cash dividend?A. $36B. $38C. $40D. $42E. $44Price per share = ($10,000 - $500) ÷ 250 = $38Difficulty level: MediumTopic: CASH DIVIDENDType: PROBLEMS61. A firm has a market value equal to its book value. Currently, the firm has excess cash of $400 and other assets of $7,600. Equity is worth $8,000. The firm has 200 shares of stock outstanding and net income of $900. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after the dividend is paid?A. $0.25B. $0.45C. $2.50D. $3.80E. $4.50Earnings per share = $900 ÷ 200 = $4.50Difficulty level: MediumTopic: CASH DIVIDENDType: PROBLEMS62. Murphy's, Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account, $10,000 in the common stock account, and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the balance in the retained earnings account be after the dividend?A. $34,700B. $35,700C. $42,700D. $49,700E. $50,700Retained earnings = [(10,000 shares ⨯ .10) ⨯ $8 ⨯ -1] + $42,700 = $34,700Difficulty level: MediumTopic: SMALL STOCK DIVIDENDType: PROBLEMS63. Murphy's, Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account, $10,000 in the common stock account and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the market price per share be after the dividend?A. $7.20B. $7.27C. $7.33D. $8.00E. $8.80Market price per share = (10,000 shares ⨯ $8) ÷ (10,000 shares ⨯ 1.10) = $7.27; Note that the total market value of the firm does not change.Difficulty level: MediumTopic: SMALL STOCK DIVIDENDType: PROBLEMS。
罗斯公司管理系统理财题库全集
Chapter 20Issuing Securities to the Public Multiple Choice Questions1. An equity issue sold directly to the public is called:A. a rights offer.B. a general cash offer.C. a restricted placement.D. a fully funded sales.E. a standard call issue.2. An equity issue sold to the firm's existing stockholders is called:A. a rights offer.B. a general cash offer.C. a private placement.D. an underpriced issue.E. an investment banker's issue.3. Management's first step in any issue of securities to the public is:A. to file a registration form with the SEC.B. to distribute copies of the preliminary prospectus.C. to distribute copies of the final prospectus.D. to obtain approval from the board of directors.E. to prepare the tombstone advertisement.4. A rights offering is:A. the issuing of options on shares to the general public to acquire stock.B. the issuing of an option directly to the existing shareholders to acquire stock.C. the issuing of proxies which are used by shareholders to exercise their voting rights.D. strictly a public market claim on the company which can be traded on an exchange.E. the awarding of special perquisites to management.5. Companies use tombstone advertisements in the financial press to:A. announce the death of the company.B. announce the failure of a financial strategy.C. announce the availability of a new issue of a corporate security.D. notify the public of foreclosure.E. None of the above.6. The first public equity issue made by a company is a(n):A. initial private offering.B. initial public offering.C. secondary offering.D. seasoned new issue.E. None of the above.7. The first public equity issue that is made by a company is referred to as:A. a rights issue.B. a general cash offer.C. an initial public offering.D. an unseasoned issue.E. Both C and D.8. A new public equity issue from a company with equity previously outstanding is called a(n):A. initial public offering.B. seasoned equity issue.C. unseasoned equity issue.D. private placement.E. syndicate.9. The green shoe option is used to:A. cover oversubscription.B. cover excess demand.C. provide additional reward to the investment bankers for a risky issue.D. provide additional reward to the issuing firm for a risky issue.E. Both A and B.10. Dilution refers to:A. the increase in stock value due to wider ownership of stock.B. the loss in existing shareholder's equity.C. the loss in new shareholder's equity.D. the loss in all shareholder's equity, both existing shareholders and new shareholders.E. None of the above.11. During the SEC waiting period the potential issuing company can issue a preliminary prospectus which contains:A. exactly the same information as the final prospectus except an indication of SEC approval.B. all the information as the final prospectus including red writing stating it is a red herring.C. very limited financial information and red writing stating it is preliminary.D. only a description of what the funds are to be used for.E. information very similar to the final prospectus without a price nor with SEC approval.12. A company must file a registration statement with the SEC providing various financial and company history information. The registration statement does not need to be filed if:A. the issue is less than $50 million.B. the loan matures within 9 months.C. the issue is less than $5.0 million.D. Both A and B.E. Both B and C.13. Regulation A security issues are exempt from full SEC registration filing and use only a brief offering statement if:A. the issue is for less than $5,000,000.B. insiders sell no more than $1,500,000 of stock.C. insiders sell no more than 100,000,000 shares.D. Both A and C.E. Both A and B.14. Potential investors learn of the information concerning the firm and its new issue from the:A. pre-underwriting negotiating meeting.B. red herring.C. letter of commitment.D. emails from their former finance professor.E. rights offering.15. A registration statement is effective on the 20th day after filing unless:A. the SEC is backlogged with statements.B. a tombstone ad is issued indicating its demise.C. a letter of comment suggesting changes is issued by the SEC.D. a syndicate can be formed sooner.E. None of the above.16. Investment banks perform which of the following services for corporate issuers:A. formulating the method used to issue the securities.B. pricing the new securities.C. selling the new securities.D. All of the above.E. None of the above.17. A group of investment bankers who pool their efforts to underwrite a security are known as a(n):A. amalgamate.B. conglomerate.C. green shoe group.D. klatch.E. syndicate.18. A firm commitment arrangement with an investment banker occurs when:A. the syndicate is in place to handle the issue.B. the spread between the buying and selling price is less than one percent.C. the issue is solidly accepted in the market evidenced by a large price increase.D. when the investment banker buys the securities for less than the offering price and accepts the risk of not being able to sell them.E. when the investment banker sells as much of the security as the market can bear without a price decrease.19. Which of the following is not normally an example of the services offered by investment bankers?A. Aiding in the sale of securitiesB. Facilitating mergersC. Acting as brokers to both individuals and institutional clientsD. Offering checking accounts to corporationsE. Both C and D20. In a best efforts offering the investment banker makes their money primarily by:A. earning the spread between the buying and offering price.B. earning a commission on each share sold.C. earning the discount between the buying and offering price.D. charging a flat fee for all services.E. None of the above.21. Under the _____ method, the underwriter buys the securities for less than the offering price and accepts the risk of not selling the issue, while under the _____ method, the underwriter does not purchase the shares but merely acts as an agent.A. best efforts; firm commitmentB. firm commitment; best effortsC. general cash offer; best effortsD. competitive offer; negotiated offerE. seasoned; unseasoned22. Professor Jay Ritter found best-efforts offerings are:A. reserved for the premier customers because they deserve 'best-efforts'.B. used most often with seasoned equity issues.C. used with small IPO issues.D. attractive because of price stability.E. None of the above.23. Empirical evidence suggests that new equity issues are generally:A. priced efficiently by the market.B. overpriced by investor excitement concerning a new issue.C. overpriced resulting from SEC regulation.D. underpriced, in part, to counteract the winner's curse.E. underpriced resulting from SEC regulation.24. The diagonal listing of investment bankers on tombstone advertisements reflects their ____ relative to the other investment bankers listed below.A. prestigeB. ability to manage selling syndicatesC. role as a firm commitment buyerD. role as a best efforts sellerE. None of the above25. The reputational capital of investment bankers is based on their roles as intermediaries with more in-depth knowledge of the issuer. Investment bankers maintain their reputation by:A. certifying the issue.B. monitoring the issuing firm's management and performance.C. pricing issues fairly.D. All of the above.E. None of the above.26. The key difference between a negotiated offer and a competitive offer is that:A. the underwriters can not set the spread in a negotiated bid but can in a competitive offer.B. the issuing firm can offer its securities to the highest bidder in a competitive bid but in a negotiated bid only one investment banker is used.C. the issuing firm works the underwriter for the best spread in a negotiated bid which will be less than that available in a competitive offer.D. the underwriter will not do a full investigation in a negotiated bid because the company is at their mercy, while in a competitive bid the underwriter must be extra diligent.E. None of the above.27. The offering price is set to make an issue attractive to the market and provide a good price to the issuer. Which of the following is/are true?A. Empirical studies by Ritter have shown that the average firm commitments have had a17.8% underpricing on the first day of trading.B. Empirical studies have shown that best efforts sales have underpricing on the first day of trading.C. Some issues which rose dramatically on the first day of trading were viewed as successfully priced by the underwriter because it helped build a long-term investment base.D. All of the above.E. None of the above.28. Empirical evidence suggests that upon announcement of a new equity issue, current stock prices generally:A. drop, perhaps because the new issue reflects management's view that common stock is currently overvalued.B. remain about the same since an efficient market anticipates a new equity issue.C. increase, perhaps because the issues are associated with positive NPV projects.D. increase, because the market supply is always less than demand.E. increase, because underwriters exercise their green shoe option.29. Underpricing can possibly be explained by:A. oversubscription of an issue.B. strong demand by investors.C. undersubscription of an issue.D. Both B and C.E. Both A and B.30. Debt capacity is often given as a reason for the value of the stock falling when equity is issued. The reason for this is:A. the high issue costs of a debt offering must be paid by the shareholders.B. the priority position of the equity is lowered.C. management has information that the probability of default has risen, limiting the debt capacity and causing the firm to raise equity capital.D. All of the above.E. None of the above31. A study by Lee, Lockhead, Ritter, and Zhao that examined the underwriting discount and other direct costs of going public with a debt or equity offering, found:A. the direct expenses are higher for equity than debt offerings.B. substantial economies of scale are prevalent.C. underpricing, on average, is similar in magnitude to total direct expenses.D. All of the above.E. None of the above.32. The six components that make up the total costs of new issues are:A. the spread; other direct expenses such as filing fees; indirect expenses such as management time; economies of scale; abnormal returns and the Green Shoe option.B. the discount; other direct expenses such as filing fees; indirect expenses such as management time; due diligence costs; abnormal returns and the Green Shoe option.C. the spread; other direct expenses such as filing fees; indirect expenses such as management time; abnormal returns; underpricing and the Green Shoe option.D. the spread; other direct expenses such as filing fees; economies of scale; due diligence costs; abnormal returns and underpricing.E. None of the above.33. In comparison to debt issuance expenses, the total direct costs of equity issues are:A. considerably less.B. about the same.C. meaningless.D. considerably greater.E. None of the above.34. To determine the value of a rights offering, the stockholder needs to know the following two pieces of information in addition to the current stock price:A. the subscription price and the number of rights needed to acquire a new share.B. the amount of new equity to be raised and the number of rights needed to acquire a new share.C. the amount of new equity to be raised and standby fee.D. the detachment date and the subscription price.E. None of the above.35. Assuming everything else is constant, when a stock goes ex-rights its price should:A. decrease since the stockholder is losing an option.B. increase since the corporation no longer has the right to force the stockholder to convert.C. remain the same since an efficient market would anticipate this change.D. move up or down depending on whether a small investor wanted to exercise his/his rights.E. None of the above.36. If a shareholder or investor wants to acquire new stock under a rights plant they must:A. acquire new stock in the market to get a controlling fraction of shares to be eligible for rights.B. simply pay a registration fee and turn in the subscription price.C. acquire the correct rights per share desired, then turn the rights and the total subscription price into the subscription agent.D. acquire the correct rights and wait for the company to send you the stock.E. call their broker and sell some CBOE options to make any money.37. Which of the following statements is true?A. The subscription price is generally above the old stock price.B. The subscription price is generally above the ex-rights price.C. The subscription price is generally below the old stock price.D. Both A and B.E. Both B and C.38. A shareholder who has rights is:A. always better off to exercise the rights.B. always better off to sell the rights into the market.C. able to exercise their rights or sell them.D. never in the same ownership position again with rights.E. None of the above.39. A standby underwriting arrangement provides the:A. company with methods to cancel the offering.B. company with an alternate investment banker if there is conflict between the issuer and the agent.C. investment banker with an oversubscription privilege to ensure profits are earned.D. company with an alternative avenue of sale to ensure success of the rights offering.E. investment bankers with an added syndication for the rights offering.40. Professor Clifford W. Smith, in evaluating issuance costs from underwritten issues, rights issues with standby underwriting, and a pure rights issues, found that 90% of the issues are underwritten, which was the most expensive method. This is done because:A. investment bankers know more than CFOs and they may buy the issue at an agreed upon price and disburse the funds sooner.B. investment bankers can increase the price received by increasing confidence in the issue, and they will buy the issue at an agreed upon price and disburse the cash sooner.C. investment bankers provide other services including price counseling, increasing public confidence, and providing funds to the issuer sooner.D. investment bankers know how to price the issue, and would not need to set as low as a price as the subscription price and provide price counseling.E. None of the above.41. Corporations use the shelf registration method of security sales because:A. preregistered securities can be quickly brought to market.B. the main registration process is eliminated for up to two years.C. their stock is below investment grade.D. Both A and B.E. Both B and C.42. In terms of costs of issuing equity, Professor Clifford W. Smith finds that the ranking of methods, from cheapest to most expensive, is:A. rights issue with standby underwriting, equity issue with underwriting, pure rights issue.B. pure rights issue, rights issue with standby underwriting, equity issue with underwriting.C. pure rights issue, preferred stock and debt issue with underwriting for an IPO, rights issue with standby underwriting.D. equity issue with underwriting, rights issue with standby underwriting, pure rights issue.E. equity issue with underwriting, pure rights issue, rights issue with standby underwriting.43. Arguments to explain why most equity issues are underwritten versus sold through a rights offering are:A. underwriters buy at an agreed upon price and bear some risk of selling the issue.B. cash proceeds are available sooner in underwriting and the issue is available to a wider market.C. investment bankers can provide market advice and certify the issue for potential investors.D. All of the above.E. None of the above.44. Corporations are allowed to use the shelf registration method if they:A. are rated investment grade and have aggregate market stock value of more than $150 million.B. have not violated the 1934 Securities Act in the past 12 months.C. have not defaulted on its debt in the past 3 years.D. All of the above.E. None of the above.45. Arguments against the use of the shelf-registration are:A. only technology and manufacturing-based firms can use it.B. less current information available to investors might raise the cost of debt.C. possible market overhang from future issues depressing price.D. Both A and C.E. Both B and C.46. The market for venture capital refers to the:A. private financial marketplace for servicing small, young firms.B. bond markets.C. market for selling rights to individuals who already own shares.D. market for selling equity securities for firms with equity already outstanding.E. None of the above.47. Rule 144A provides the framework for the issuance of private securities to qualified institutional investors. To buy private securities, institutional investors:A. must be willing to hold a less liquid security and manage a fund.B. must be willing to make a market in the security and be a primary market dealer.C. must be a limited partner in the issue and willing to reduce the illiquidity of the security.D. must be willing to hold a less liquid security and have $100 million under management.E. None of the above.48. Venture capitalists provide financing for new firms from the seed and start-up stage all the way to mezzanine and bridge financing. In exchange for financing, entrepreneurs give:A. a high interest rate debt instrument and control.B. an equity position and usually board of director positions.C. up the right to have an initial public offering.D. control to a court appointed trustee.E. the venture capitalists jobs as CEOs and CFOs.49. An IPO of a firm formerly financed by venture capital is carried out for what primary purposes?A. Insiders can sell their shares or cash outB. Generate cash to pay down bank indebtednessC. To establish a market value for the equity and provide funds for operationsD. All of the above.E. None of the above.50. Which of the following is not one of the four main functions that underwriters provide?A. Risk bearingB. MarketingC. Auditing the financial statementsD. CertificationE. Monitoring51. Types of dilution include:A. dilution of percentage ownershipB. dilution of market shareC. dilution of book value and earnings per shareD. A and CE. All of the above52. The Wordsmith Corporation has 10,000 shares outstanding at $30 each. They expect to raise $150,000 by a rights offering with a subscription price of $25. How many rights must you turn in to get a new share?A. 0.60B. 1.20C. 1.67D. 2.00E. Insufficient data to determine53. Assuming everything else is constant, if a stock's old price is $25 and the ex-rights or new stock price is $19, then the value of the right is:A. $-6.B. $6.C. impossible to determine without the subscription price.D. impossible to determine without the number of rights needed to buy one share.54. The LaPorte Corporation has a new rights offering that allows you to buy one share of stock with 3 rights and $20 per share. The stock is now selling ex-rights for $26. The price rights-on is:A. $22.00B. $24.00C. $26.00D. $28.00E. impossible to determine without the cum-rights price.55. Regional Power wants to raise $10 million in new equity. The subscription price is $20. There are currently 3 million shares outstanding, each with 1 right. How many rights are needed to purchase 1 share?A. 1B. 3C. 5D. 6E. 856. The Overland Corporation intends to issue 50,000 new shares to raise funds for expansion of current plant facilities. The current share price is $40 and there are 500,000 shares outstanding. The number of rights needed to buy a share of stock should be:A. 1B. 10C. 40D. 400E. indeterminate without the subscription price.57. The Schroeder Corporation has 20,000 shares outstanding at $20 each. They expect to raise $200,000 by a rights offering with a subscription price of $25. How many rights must you turn in to get a new share?A. 1.25B. 1.50C. 2.00D. 2.50E. Insufficient data to determine58. Assuming everything else is constant, if a stock's old price is $40 and the ex-rights or new stock price is $32, then the value of the right is:A. $-8.B. $8.C. impossible to determine without the subscription price.D. impossible to determine without the number of rights needed to buy one share.59. The Holly Corporation has a new rights offering that allows you to buy one share of stock with 4 rights and $25 per share. The stock is now selling ex-rights for $30. The price rights-on is:A. $21.00B. $25.00C. $30.00D. $31.25E. impossible to determine without the cum-rights price.60. Bradley Power wants to raise $40 million in new equity. The subscription price is $25. There are currently 5 million shares outstanding, each with 1 right. How many rights are needed to purchase 1 share?A. 1.000B. 3.000C. 3.125D. 4.525E. 6.52561. The Shields Corporation intends to issue 100,000 new shares to raise funds for expansion of current plant facilities. The current share price is $20 and there are 500,000 shares outstanding. The number of rights needed to buy a share of stock should be:A. 1B. 5C. 20D. 50E. indeterminate without the subscription price.62. For a particular stock the old stock price is $20, the ex-rights price is $15, and the number of rights needed to buy a new share is 2. Assuming everything else constant, the subscription price is ______ .A. $5B. $13C. $17D. $18E. $20Essay QuestionsThe Holyoke Corporation has 120,000 shares outstanding with a current market price of $8.10 per share. The company needs to raise an additional $36,000 to finance new expenditures, and has decided on a rights issue. The issue will allow current stockholders to purchase one additional share for 20 rights at a subscription price of $6 per share.63. Calculate the ex-rights price that would make a new stockholder indifferent between buying shares at the old stock price and exercising the rights or buying the shares ex-rights.64. If the ex-rights price were set at $7.90, would you as a potential new stockholder choose to buy shares ex-rights or buy shares at the old price and exercise your rights?65. Suppose that the company was also considering structuring the rights issue to allow for an additional share to be purchased for 10 rights at a subscription price of $3. Prove that a stockholder with 100 shares would be indifferent between purchasing a new share for 10 rights at $3 or purchasing a new share for 20 rights at $6.66. Explain the advantages of a shelf-registration to an issuer. How can timeliness of disclosure and a potential market overhang work against a shelf-registration?67. The evidence on IPO sales is varied from issue to issue, but there are three common themes; underpricing, underperformance, and the reasons for going public. Explain these three themes.68. The Direct Interactive Publishing Company is planning to raise $200 million dollars in new capital. There are currently 50 million shares outstanding with an estimated market price of $60 each. The corporate officers are debating whether to use a rights offering (with or without a standby underwriting) or have the issue fully underwritten. The company is currently listed on a regional exchange and plans to list on a national exchange after the security issue. List and explain three advantages/disadvantages of each method.69. Discuss what a Dutch auction is and how it works.70. Lamar Inc. is attempting to raise $5,000,000 in new equity with a rights offering. The subscription price will be $40 per share. The stock currently sells for $50 per share and there are 250,000 shares outstanding. How many rights are needed to buy a new share?71. Lamar Inc. is attempting to raise $5,000,000 in new equity with a rights offering. The subscription price for the 125,000 new shares will be $40 per share. The stock currently sells for $50 per share and there are 250,000 shares outstanding. What will the price per share be if all rights are exercised?Chapter 20 Issuing Securities to the Public Answer KeyMultiple Choice Questions1. An equity issue sold directly to the public is called:A. a rights offer.B. a general cash offer.C. a restricted placement.D. a fully funded sales.E. a standard call issue.Difficulty level: EasyTopic: EQUITY ISSUEType: DEFINITIONS2. An equity issue sold to the firm's existing stockholders is called:A. a rights offer.B. a general cash offer.C. a private placement.D. an underpriced issue.E. an investment banker's issue.Difficulty level: EasyTopic: RIGHTS OFFERType: DEFINITIONS3. Management's first step in any issue of securities to the public is:A. to file a registration form with the SEC.B. to distribute copies of the preliminary prospectus.C. to distribute copies of the final prospectus.D. to obtain approval from the board of directors.E. to prepare the tombstone advertisement.Difficulty level: EasyTopic: SECURITY ISSUANCEType: DEFINITIONS4. A rights offering is:A. the issuing of options on shares to the general public to acquire stock.B. the issuing of an option directly to the existing shareholders to acquire stock.C. the issuing of proxies which are used by shareholders to exercise their voting rights.D. strictly a public market claim on the company which can be traded on an exchange.E. the awarding of special perquisites to management.Difficulty level: MediumTopic: RIGHTS OFFERINGType: DEFINITIONS5. Companies use tombstone advertisements in the financial press to:A. announce the death of the company.B. announce the failure of a financial strategy.C. announce the availability of a new issue of a corporate security.D. notify the public of foreclosure.E. None of the above.Difficulty level: EasyTopic: NEW ISSUANCEType: DEFINITIONS6. The first public equity issue made by a company is a(n):A. initial private offering.B. initial public offering.C. secondary offering.D. seasoned new issue.E. None of the above.Difficulty level: EasyTopic: INITIAL PUBLIC OFFERINGType: DEFINITIONS7. The first public equity issue that is made by a company is referred to as:A. a rights issue.B. a general cash offer.C. an initial public offering.D. an unseasoned issue.E. Both C and D.Difficulty level: MediumTopic: INITIAL PUBLIC OFFERINGType: DEFINITIONS8. A new public equity issue from a company with equity previously outstanding is called a(n):A. initial public offering.B. seasoned equity issue.C. unseasoned equity issue.D. private placement.E. syndicate.Difficulty level: EasyTopic: SEASONED EQUITY OFFERINGType: DEFINITIONS9. The green shoe option is used to:A. cover oversubscription.B. cover excess demand.C. provide additional reward to the investment bankers for a risky issue.D. provide additional reward to the issuing firm for a risky issue.E. Both A and B.Difficulty level: MediumTopic: GREEN SHOE PROVISIONType: DEFINITIONS。
(完整版)公司理财-罗斯课后习题答案
(完整版)公司理财-罗斯课后习题答案-CAL-FENGHAI-(2020YEAR-YICAI)_JINGBIAN第一章1.在所有权形式的公司中,股东是公司的所有者。
股东选举公司的董事会,董事会任命该公司的管理层。
企业的所有权和控制权分离的组织形式是导致的代理关系存在的主要原因。
管理者可能追求自身或别人的利益最大化,而不是股东的利益最大化。
在这种环境下,他们可能因为目标不一致而存在代理问题。
2.非营利公司经常追求社会或政治任务等各种目标。
非营利公司财务管理的目标是获取并有效使用资金以最大限度地实现组织的社会使命。
3.这句话是不正确的。
管理者实施财务管理的目标就是最大化现有股票的每股价值，当前的股票价值反映了短期和长期的风险、时间以及未来现金流量。
4.有两种结论。
一种极端,在市场经济中所有的东西都被定价。
因此所有目标都有一个最优水平，包括避免不道德或非法的行为，股票价值最大化。
另一种极端,我们可以认为这是非经济现象,最好的处理方式是通过政治手段。
一个经典的思考问题给出了这种争论的答案:公司估计提高某种产品安全性的成本是30美元万。
然而,该公司认为提高产品的安全性只会节省20美元万。
请问公司应该怎么做呢?”5.财务管理的目标都是相同的,但实现目标的最好方式可能是不同的,因为不同的国家有不同的社会、政治环境和经济制度。
6.管理层的目标是最大化股东现有股票的每股价值。
如果管理层认为能提高公司利润，使股价超过35美元,那么他们应该展开对恶意收购的斗争。
如果管理层认为该投标人或其它未知的投标人将支付超过每股35美元的价格收购公司,那么他们也应该展开斗争。
然而,如果管理层不能增加企业的价值,并且没有其他更高的投标价格,那么管理层不是在为股东的最大化权益行事。
现在的管理层经常在公司面临这些恶意收购的情况时迷失自己的方向。
7.其他国家的代理问题并不严重,主要取决于其他国家的私人投资者占比重较小。
较少的私人投资者能减少不同的企业目标。
罗斯公司理财题库全集
Chapter 16Capital Structure: Basic Concepts Multiple Choice Questions1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called:A. homemade leverage.B. dividend recapture.C. the weighted average cost of capital.D. private debt placement.E. personal offset.2. The proposition that the value of the firm is independent of its capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.3. The proposition that the cost of equity is a positive linear function of capital structure is called:A. the capital asset pricing model.B. MM Proposition I.C. MM Proposition II.D. the law of one price.E. the efficient markets hypothesis.4. The tax savings of the firm derived from the deductibility of interest expense is called the:A. interest tax shield.B. depreciable basis.C. financing umbrella.D. current yield.E. tax-loss carry forward savings.5. The unlevered cost of capital is:A. the cost of capital for a firm with no equity in its capital structure.B. the cost of capital for a firm with no debt in its capital structure.C. the interest tax shield times pretax net income.D. the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.E. equal to the profit margin for a firm with some debt in its capital structure.6. The cost of capital for a firm, rWACC, in a zero tax environment is:A. equal to the expected earnings divided by market value of the unlevered firm.B. equal to the rate of return for that business risk class.C. equal to the overall rate of return required on the levered firm.D. is constant regardless of the amount of leverage.E. All of the above.7. The difference between a market value balance sheet and a book value balance sheet is that a market value balance sheet:A. places assets on the right hand side.B. places liabilities on the left hand side.C. does not equate the right hand with the left hand side.D. lists items in terms of market values, not historical costs.E. uses the market rate of return.8. The firm's capital structure refers to:A. the way a firm invests its assets.B. the amount of capital in the firm.C. the amount of dividends a firm pays.D. the mix of debt and equity used to finance the firm's assets.E. how much cash the firm holds.9. A general rule for managers to follow is to set the firm's capital structure such that:A. the firm's value is minimized.B. the firm's value is maximized.C. the firm's bondholders are made well off.D. the firms suppliers of raw materials are satisfied.E. the firms dividend payout is maximized.10. A levered firm is a company that has:A. Accounts Payable as the only liability on the balance sheet.B. some debt in the capital structure.C. all equity in the capital structure.D. All of the above.E. None of the above.11. A manager should attempt to maximize the value of the firm by:A. changing the capital structure if and only if the value of the firm increases.B. changing the capital structure if and only if the value of the firm increases to the benefit of inside management.C. changing the capital structure if and only if the value of the firm increases only to the benefits of the debtholders.D. changing the capital structure if and only if the value of the firm increases although it decreases the stockholders' value.E. changing the capital structure if and only if the value of the firm increases and stockholder wealth is constant.12. The effect of financial leverage depends on the operating earnings of the company. Which of the following is not true?A. Below the indifference or break-even point in EBIT the non-levered structure is superior.B. Financial leverage increases the slope of the EPS line.C. Above the indifference or break-even point the increase in EPS for all equity structures is less than debt-equity structures.D. Above the indifference or break-even point the increase in EPS for all equity structures is greater than debt-equity structures.E. The rate of return on operating assets is unaffected by leverage.13. The Modigliani-Miller Proposition I without taxes states:A. a firm cannot change the total value of its outstanding securities by changing its capital structure proportions.B. when new projects are added to the firm the firm value is the sum of the old value plus the new.C. managers can make correct corporate decisions that will satisfy all shareholders if they select projects that maximize value.D. the determination of value must consider the timing and risk of the cash flows.E. None of the above.14. MM Proposition I without taxes is used to illustrate:A. the value of an unlevered firm equals that of a levered firm.B. that one capital structure is as good as another.C. leverage does not affect the value of the firm.D. capital structure changes have no effect on stockholders' welfare.E. All of the above.15. A key assumption of MM's Proposition I without taxes is:A. that financial leverage increases risk.B. that individuals can borrow on their own account at rates less than the firm.C. that individuals must be able to borrow on their own account at rates equal to the firm.D. managers are acting to maximize the value of the firm.E. All of the above.16. In an EPS-EBI graphical relationship, the slope of the debt ray is steeper than the equity ray. The debt ray has a lower intercept because:A. more shares are outstanding for the same level of EBI.B. the break-even point is higher with debt.C. a fixed interest charge must be paid even at low earnings.D. the amount of interest per share has only a positive effect on the intercept.E. the higher the interest rate the greater the slope.17. In an EPS-EBI graphical relationship, the debt ray and equity ray cross. At this point the equity and debt are:A. equivalent with respect to EPS but above and below this point equity is always superior.B. at breakeven in EPS but above this point debt increases EPS via leverage and decreases EPS below this point.C. equal but away from breakeven equity is better as fewer shares are outstanding.D. at breakeven and MM Proposition II states that debt is the better choice.E. at breakeven and debt is the better choice below breakeven because small payments can be made.18. When comparing levered vs. unlevered capital structures, leverage works to increase EPS for high levels of EBIT because:A. interest payments on the debt vary with EBIT levels.B. interest payments on the debt stay fixed, leaving less income to be distributed over less shares.C. interest payments on the debt stay fixed, leaving more income to be distributed over less shares.D. interest payments on the debt stay fixed, leaving less income to be distributed over more shares.E. interest payments on the debt stay fixed, leaving more income to be distributed over more shares.19. Financial leverage impacts the performance of the firm by:A. maintaining the same level of volatility of the firm's EBIT.B. decreasing the volatility of the firm's EBIT.C. decreasing the volatility of the firm's net income.D. increasing the volatility of the firm's net income.E. None of the above.20. The increase in risk to equityholders when financial leverage is introduced is evidenced by:A. higher EPS as EBIT increases.B. a higher variability of EPS with debt than all equity.C. increased use of homemade leverage.D. equivalence value between levered and unlevered firms in the presence of taxes.E. None of the above.21. The reason that MM Proposition I does not hold in the presence of corporate taxation is because:A. levered firms pay less taxes compared with identical unlevered firms.B. bondholders require higher rates of return compared with stockholders.C. earnings per share are no longer relevant with taxes.D. dividends are no longer relevant with taxes.E. All of the above.22. MM Proposition I with corporate taxes states that:A. capital structure can affect firm value.B. by raising the debt-to-equity ratio, the firm can lower its taxes and thereby increase its total value.C. firm value is maximized at an all debt capital structure.D. All of the above.E. None of the above.23. The change in firm value in the presence of corporate taxes only is:A. positive as equityholders face a lower effective tax rate.B. positive as equityholders gain the tax shield on the debt interest.C. negative because of the increased risk of default and fewer shares outstanding.D. negative because of a reduction of equity outstanding.E. None of the above.24. A firm should select the capital structure which:A. produces the highest cost of capital.B. maximizes the value of the firm.C. minimizes taxes.D. is fully unlevered.E. has no debt.25. In a world of no corporate taxes if the use of leverage does not change the value of the levered firm relative to the unlevered firm is known as:A. MM Proposition III that the cost of stock is less than the cost of debt.B. MM Proposition I that leverage is invariant to market value.C. MM Proposition II that the cost of equity is always constant.D. MM Proposition I that the market value of the firm is invariant to the capital structure.E. MM Proposition III that there is no risk associated with leverage in a no tax world.26. Bryan invested in Bryco, Inc. stock when the firm was financed solely with equity. The firm is now utilizing debt in its capital structure. To unlever his position, Bryan needs to:A. borrow some money and purchase additional shares of Bryco stock.B. maintain his current position as the debt of the firm did not affect his personal leverage position.C. sell some shares of Bryco stock and hold the proceeds in cash.D. sell some shares of Bryco stock and loan it out such that he creates a personal debt-equity ratio equal to that of the firm.E. create a personal debt-equity ratio that is equal to exactly 50% of the debt-equity ratio of the firm.27. The capital structure chosen by a firm doesn't really matter because of:A. taxes.B. the interest tax shield.C. the relationship between dividends and earnings per share.D. the effects of leverage on the cost of equity.E. homemade leverage.28. MM Proposition I with no tax supports the argument that:A. business risk determines the return on assets.B. the cost of equity rises as leverage rises.C. it is completely irrelevant how a firm arranges its finances.D. a firm should borrow money to the point where the tax benefit from debt is equal to the cost of the increased probability of financial distress.E. financial risk is determined by the debt-equity ratio.29. The proposition that the value of a levered firm is equal to the value of an unlevered firm is known as:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.30. The concept of homemade leverage is most associated with:A. MM Proposition I with no tax.B. MM Proposition II with no tax.C. MM Proposition I with tax.D. MM Proposition II with tax.E. static theory proposition.31. Which of the following statements are correct in relation to MM Proposition II with no taxes?I. The required return on assets is equal to the weighted average cost of capital.II. Financial risk is determined by the debt-equity ratio.III. Financial risk determines the return on assets.IV. The cost of equity declines when the amount of leverage used by a firm rises.A. I and III onlyB. II and IV onlyC. I and II onlyD. III and IV onlyE. I and IV only32. MM Proposition I with taxes supports the theory that:A. there is a positive linear relationship between the amount of debt in a levered firm and its value.B. the value of a firm is inversely related to the amount of leverage used by the firm.C. the value of an unlevered firm is equal to the value of a levered firm plus the value of the interest tax shield.D. a firm's cost of capital is the same regardless of the mix of debt and equity used by the firm.E. a firm's weighted average cost of capital increases as the debt-equity ratio of the firm rises.33. MM Proposition I with taxes is based on the concept that:A. the optimal capital structure is the one that is totally financed with equity.B. the capital structure of the firm does not matter because investors can use homemade leverage.C. the firm is better off with debt based on the weighted average cost of capital.D. the value of the firm increases as total debt increases because of the interest tax shield.E. the cost of equity increases as the debt-equity ratio of a firm increases.34. MM Proposition II with taxes:A. has the same general implications as MM Proposition II without taxes.B. reveals how the interest tax shield relates to the value of a firm.C. supports the argument that business risk is determined by the capital structure employed by a firm.D. supports the argument that the cost of equity decreases as the debt-equity ratio increases.E. reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.35. MM Proposition II is the proposition that:A. supports the argument that the capital structure of a firm is irrelevant to the value of the firm.B. the cost of equity depends on the return on debt, the debt-equity ratio and the tax rate.C. a firm's cost of equity capital is a positive linear function of the firm's capital structure.D. the cost of equity is equivalent to the required return on the total assets of a firm.E. supports the argument that the size of the pie does not depend on how the pie is sliced.36. The interest tax shield has no value for a firm when:I. the tax rate is equal to zero.II. the debt-equity ratio is exactly equal to 1.III. the firm is unlevered.IV. a firm elects 100% equity as its capital structure.A. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, and IV only37. The interest tax shield is a key reason why:A. the required rate of return on assets rises when debt is added to the capital structure.B. the value of an unlevered firm is equal to the value of a levered firm.C. the net cost of debt to a firm is generally less than the cost of equity.D. the cost of debt is equal to the cost of equity for a levered firm.E. firms prefer equity financing over debt financing.38. Which of the following will tend to diminish the benefit of the interest tax shield given a progressive tax rate structure?I. a reduction in tax ratesII. a large tax loss carryforwardIII. a large depreciation tax deductionIV. a sizeable increase in taxable incomeA. I and II onlyB. I and III onlyC. II and III onlyD. I, II, and III onlyE. I, II, III, and IV39. Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding. The company is in the process of borrowing $8 million at 9% interest to repurchase 200,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes?A. $20.0 millionB. $20.8 millionC. $21.0 millionD. $21.2 millionE. $21.3 million40. Uptown Interior Designs is an all equity firm that has 40,000 shares of stock outstanding. The company has decided to borrow $1 million to buy out the shares of a deceased stockholder who holds 2,500 shares. What is the total value of this firm if you ignore taxes?A. $15.5 millionB. $15.6 millionC. $16.0 millionD. $16.8 millionE. $17.2 million41. You own 25% of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all equity firm. The other shareholders have agreed to have the firm borrow $1.5 million to purchase your 1,000 shares of stock. What is the total value of this firm today if you ignore taxes?A. $4.8 millionB. $5.1 millionC. $5.4 millionD. $5.7 millionE. $6.0 million42. Your firm has a debt-equity ratio of .75. Your pre-tax cost of debt is 8.5% and your required return on assets is 15%. What is your cost of equity if you ignore taxes?A. 11.25%B. 12.21%C. 16.67%D. 19.88%E. 21.38%43. Bigelow, Inc. has a cost of equity of 13.56% and a pre-tax cost of debt of 7%. The required return on the assets is 11%. What is the firm's debt-equity ratio based on MM Proposition II with no taxes?A. .60B. .64C. .72D. .75E. .8044. The Backwoods Lumber Co. has a debt-equity ratio of .80. The firm's required return on assets is 12% and its cost of equity is 15.68%. What is the pre-tax cost of debt based on MM Proposition II with no taxes?A. 6.76%B. 7.00%C. 7.25%D. 7.40%E. 7.50%45. The Winter Wear Company has expected earnings before interest and taxes of $2,100, an unlevered cost of capital of 14% and a tax rate of 34%. The company also has $2,800 of debt that carries a 7% coupon. The debt is selling at par value. What is the value of this firm?A. $9,900B. $10,852C. $11,748D. $12,054E. $12,70046. Gail's Dance Studio is currently an all equity firm that has 80,000 shares of stock outstanding with a market price of $42 a share. The current cost of equity is 12% and the tax rate is 34%. Gail is considering adding $1 million of debt with a coupon rate of 8% to her capital structure. The debt will be sold at par value. What is the levered value of the equity?A. $2.4 millionB. $2.7 millionC. $3.3 millionD. $3.7 millionE. $3.9 million47. The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the firm?A. $48,600B. $50,000C. $52,680D. $56,667E. $60,60048. Scott's Leisure Time Sports is an unlevered firm with an after-tax net income of $86,000. The unlevered cost of capital is 10% and the tax rate is 34%. What is the value of this firm?A. $567,600B. $781,818C. $860,000D. $946,000E. $1,152,40049. An unlevered firm has a cost of capital of 14% and earnings before interest and taxes of $150,000. A levered firm with the same operations and assets has both a book value and a face value of debt of $700,000 with a 7% annual coupon. The applicable tax rate is 35%. What is the value of the levered firm?A. $696,429B. $907,679C. $941,429D. $1,184,929E. $1,396,42950. The Spartan Co. has an unlevered cost of capital of 11%, a cost of debt of 8%, and a tax rate of 35%. What is the target debt-equity ratio if the targeted cost of equity is 12%?A. .44B. .49C. .51D. .56E. .6251. Hey Guys!, Inc. has debt with both a face and a market value of $3,000. This debt has a coupon rate of 7% and pays interest annually. The expected earnings before interest and taxes is $1,200, the tax rate is 34%, and the unlevered cost of capital is 12%. What is the firm's cost of equity?A. 13.25%B. 13.89%C. 13.92%D. 14.14%E. 14.25%52. Anderson's Furniture Outlet has an unlevered cost of capital of 10%, a tax rate of 34%, and expected earnings before interest and taxes of $1,600. The company has $3,000 in bonds outstanding that have an 8% coupon and pay interest annually. The bonds are selling at par value. What is the cost of equity?A. 8.67%B. 9.34%C. 9.72%D. 9.99%E. 10.46%53. Walter's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%. What is the pre-tax cost of debt?A. 7.92%B. 8.10%C. 8.16%D. 8.84%E. 9.00%54. Rosita's has a cost of equity of 13.8% and a pre-tax cost of debt of 8.5%. The debt-equity ratio is .60 and the tax rate is .34. What is Rosita's unlevered cost of capital?A. 8.83%B. 12.30%C. 13.97%D. 14.08%E. 14.60%55. Your firm has a pre-tax cost of debt of 7% and an unlevered cost of capital of 13%. Your tax rate is 35% and your cost of equity is 15.26%. What is your debt-equity ratio?A. .43B. .49C. .51D. .54E. .5856. Wild Flowers Express has a debt-equity ratio of .60. The pre-tax cost of debt is 9% while the unlevered cost of capital is 14%. What is the cost of equity if the tax rate is 34%?A. 7.52%B. 8.78%C. 15.98%D. 16.83%E. 17.30%57. Your firm has a $250,000 bond issue outstanding. These bonds have a 7% coupon, pay interest semiannually, and have a current market price equal to 103% of face value. What is the amount of the annual interest tax shield given a tax rate of 35%?A. $6,125B. $6,309C. $9,500D. $17,500E. $18,02558. Bertha's Boutique has 2,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 9%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 34%?A. $58,500B. $60,100C. $60,750D. $61,200E. $62,25059. Juanita's Steak House has $12,000 of debt outstanding that is selling at par and has a coupon rate of 8%. The tax rate is 34%. What is the present value of the tax shield?A. $2,823B. $2,887C. $4,080D. $4,500E. $4,63360. A firm has debt of $5,000, equity of $16,000, a leveraged value of $8,900, a cost of debt of 8%, a cost of equity of 12%, and a tax rate of 34%. What is the firm's weighted average cost of capital?A. 7.29%B. 7.94%C. 8.87%D. 10.40%E. 11.05%61. A firm has zero debt in its capital structure. Its overall cost of capital is 10%. The firm is considering a new capital structure with 60% debt. The interest rate on the debt would be 8%. Assuming there are no taxes or other imperfections, its cost of equity capital with the new capital structure would be _____.A. 9%B. 10%C. 13%D. 14%E. None of the above.62. A firm has a debt-to-equity ratio of .60. Its cost of debt is 8%. Its overall cost of capital is 12%. What is its cost of equity if there are no taxes or other imperfections?A. 10.0%B. 13.5%C. 14.4%D. 18.0%E. None of the above.63. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If there are no taxes or other imperfections, what would be its cost of equity if the debt-to-equity ratio were 0?A. 8%B. 10%C. 12%D. 14%E. 16%64. A firm has a debt-to-equity ratio of 1.20. If it had no debt, its cost of equity would be 15%. Its cost of debt is 10%. What is its cost of equity if there are no taxes or other imperfections?A. 10%B. 15%C. 18%D. 21%E. None of the above.65. If a firm is unlevered and has a cost of equity capital of 12%, what would its cost of equity be if its debt-equity ratio became 2? The expected cost of debt is 8%.A. 14.0%B. 14.67%C. 16.0%D. 20.0%E. None of the above.66. A firm has zero debt in its capital structure. Its overall cost of capital is 9%. The firm is considering a new capital structure with 40% debt. The interest rate on the debt would be 4%. Assuming that the corporate tax rate is 34%, what would its cost of equity capital with the new capital structure be?A. 10.3%B. 11.0%C. 11.2%D. 13.9%E. None of the above.67. A firm has a debt-to-equity ratio of 1. Its cost of equity is 16%, and its cost of debt is 8%. If the corporate tax rate is 25%, what would its cost of equity be if the debt-to-equity ratio were 0?A. 11.11%B. 12.57%C. 13.33%D. 16.00%E. None of the above.68. A firm has a debt-to-equity ratio of .5. Its cost of equity is 22%, and its cost of debt is 16%. If the corporate tax rate is .40, what would its cost of equity be if the debt-to-equity ratio were 0?A. 14.00%B. 20.61%C. 21.07%D. 22.00%E. None of the above.69. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 14%. Its cost of debt is 10%. What is its cost of equity if the corporate tax rate is 50%?A. 14.0%B. 16.0%C. 17.5%D. 21.0%E. None of the above.70. What is the cost of equity for a firm if the corporate tax rate is 40%? The firm has adebt-to-equity ratio of 1.5. If it had no debt, its cost of equity would be 16%. Its current cost of debt is 10%.A. 17.4%B. 18.4%C. 19.6%D. 21.4%E. None of the above.71. A firm has a debt-to-equity ratio of 1.75. If it had no debt, its cost of equity would be 9%. Its cost of debt is 7%. What is its cost of equity if the corporate tax rate is 50%?A. 7.73%B. 10.00%C. 10.75%D. 12.50%E. None of the above.72. Batter's Home has 3,000 bonds outstanding with a face value of $1,000 each and a coupon rate of 8%. The interest is paid semi-annually. What is the amount of the annual interest tax shield if the tax rate is 30%?A. $52,000B. $60,000C. $62,500D. $68,000E. $72,00073. Reena Industries has $10,000 of debt outstanding that is selling at par and has a coupon rate of 7%. The tax rate is 34%. What is the present value of the tax shield?A. $2,800B. $3,000C. $3,400D. $3,800E. $7.00074. A firm has debt of $7,000, equity of $12,000, a leveraged value of $8,900, a cost of debt of 7%, a cost of equity of 14%, and a tax rate of 30%. What is the firm's weighted average cost of capital?A. 8.45%B. 9.90%C. 10.65%D. 12.50%E. 14.00%Essay Questions75. Based on MM with taxes and without taxes, how much time should a financial manager spend analyzing the capital structure of his firm? What if the analysis is based on the static theory?76. Explain homemade leverage and why it matters.77. In each of the theories of capital structure the cost of equity rises as the amount of debt increases. So why don't financial managers use as little debt as possible to keep the cost of equity down? After all, isn't the goal of the firm to maximize share value and minimize shareholder costs?Consider two firms, U and L, both with $50,000 in assets. Firm U is unlevered, and firm L has $20,000 of debt that pays 8% interest. Firm U has 1,000 shares outstanding, while firm L has 600 shares outstanding. Mike owns 20% of firm L and believes that leverage works in his favor. Steve tells Mike that this is an illusion, and that with the possibility of borrowing on his own account at 8% interest, he can replicate Mike's payout from firm L.78. Given a level of operating income of $2,500, show the specific strategy that Mike has in mind.79. After seeing Steve's analysis, Mike tells Steve that while his analysis looks good on paper, Steve will never be able to borrow at 8%, but would have to pay a more realistic rate of 12%. If Mike is right, what will Steve's payout be?80. Suppose the tax authorities allow firms to deduct their interest expense from operating income. Both firm U and firm L are in the 34% tax bracket. Show what happens to the market value of both firms if the debt held by firm L is permanent. Assume MM with taxes.。
罗斯公司理财题库全集
Chapter 17Capital Structure: Limits to the Use of Debt Multiple Choice Questions1. The explicit costs, such as the legal expenses, associated with corporate default are classified as _____ costs.A. flotationB. beta conversionC. direct bankruptcyD. indirect bankruptcyE. unlevered2. The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as _____ costs.A. flotationB. direct bankruptcyC. indirect bankruptcyD. financial solvencyE. capital structure3. The explicit and implicit costs associated with corporate default are referred to as the _____ costs of a firm.A. flotationB. default betaC. direct bankruptcyD. indirect bankruptcyE. financial distress4. Indirect costs of financial distress:A. effectively limit the amount of equity a firm issues.B. serve as an incentive to increase the financial leverage of a firm.C. include direct costs such as legal and accounting fees.D. tend to increase as the debt-equity ratio decreases.E. include the costs incurred by a firm as it tries to avoid seeking bankruptcy protection.5. The legal proceeding for liquidating or reorganizing a firm operating in default is called a:A. tender offer.B. bankruptcy.C. merger.D. takeover.E. proxy fight.6. The value of a firm is maximized when the:A. cost of equity is maximized.B. tax rate is zero.C. levered cost of capital is maximized.D. weighted average cost of capital is minimized.E. debt-equity ratio is minimized.7. The optimal capital structure has been achieved when the:A. debt-equity ratio is equal to 1.B. weight of equity is equal to the weight of debt.C. cost of equity is maximized given a pre-tax cost of debt.D. debt-equity ratio is such that the cost of debt exceeds the cost of equity.E. debt-equity ratio selected results in the lowest possible weighed average cost of capital.8. In a world with taxes and financial distress, when a firm is operating with the optimal capital structure:I. the debt-equity ratio will also be optimal.II. the weighted average cost of capital will be at its minimal point.III. the required return on assets will be at its maximum point.IV. the increased benefit from additional debt is equal to the increased bankruptcy costs of that debt.A. I and IV onlyB. II and III onlyC. I and II onlyD. II, III, and IV onlyE. I, II, and IV only9. The optimal capital structure will tend to include more debt for firms with:A. the highest depreciation deductions.B. the lowest marginal tax rate.C. substantial tax shields from other sources.D. lower probability of financial distress.E. less taxable income.10. The optimal capital structure of a firm _____ the marketed claims and _____ the nonmarketed claims against the cash flows of the firm.A. minimizes; minimizesB. minimizes; maximizesC. maximizes; minimizesD. maximizes; maximizesE. equates; (leave blank)11. The optimal capital structure:A. will be the same for all firms in the same industry.B. will remain constant over time unless the firm makes an acquisition.C. of a firm will vary over time as taxes and market conditions change.D. places more emphasis on the operations of a firm rather than the financing of a firm.E. is unaffected by changes in the financial markets.12. The basic lesson of MM theory is that the value of a firm is dependent upon the:A. capital structure of the firm.B. total cash flows of the firm.C. percentage of a firm to which the bondholders have a claim.D. tax claim placed on the firm by the government.E. size of the stockholders claims on the firm.13. Corporations in the U.S. tend to:A. minimize taxes.B. underutilize debt.C. rely less on equity financing than they should.D. have extremely high debt-equity ratios.E. rely more heavily on bonds than stocks as the major source of financing.14. In general, the capital structures used by U.S. firms:A. tend to overweigh debt in relation to equity.B. are easily explained in terms of earnings volatility.C. are easily explained by analyzing the types of assets owned by the various firms.D. tend to be those which maximize the use of the firm's available tax shelters.E. vary significantly across industries.15. The MM theory with taxes implies that firms should issue maximum debt. In practice, this is not true because:A. debt is more risky than equity.B. bankruptcy is a disadvantage to debt.C. firms will incur large agency costs of short term debt by issuing long term debt.D. Both A and B.E. Both B and C.16. Although the use of debt provides tax benefits to the firm, debt also puts pressure on the firm to:A. meet interest and principal payments which, if not met, can put the company into financial distress.B. make dividend payments which if not met can put the company into financial distress.C. meet both interest and dividend payments which when met increase the firm cash flow.D. meet increased tax payments thereby increasing firm value.E. None of the above.17. Given realistic estimates of the probability and cost of bankruptcy, the future costs of a possible bankruptcy are borne by:A. all investors in the firm.B. debtholders only because if default occurs interest and principal payments are not made.C. shareholders because debtholders will pay less for the debt providing less cash for the shareholders.D. management because if the firm defaults they will lose their jobs.E. None of the above.18. Conflicts of interest between stockholders and bondholders are known as:A. trustee costs.B. financial distress costs.C. dealer costs.D. agency costs.E. underwriting costs.19. One of the indirect costs of bankruptcy is the incentive for managers to take large risks. When following this strategy:A. the firm will rank all projects and take the project which results in the highest expected value of the firm.B. bondholders expropriate value from stockholders by selecting high risk projects.C. stockholders expropriate value from bondholders by selecting high risk projects.D. the firm will always take the low risk project.E. Both A and B.20. One of the indirect costs to bankruptcy is the incentive toward underinvestment. Following this strategy may result in:A. the firm always choosing projects with the positive NPVs.B. the firm turning down positive NPV projects that it would clearly accept in an all equity firm.C. stockholders contributing the full amount of the investment, but both stockholders and bondholders sharing in the benefits of the project.D. Both A and C.E. Both B and C.21. Which of the following is true?A. A firm with low anticipated profit will likely take on a high level of debt.B. A successful firm will probably take on zero debt.C. Rational firms raise debt levels when profits are expected to decline.D. Rational investors are likely to infer a higher firm value from a zero debt level.E. Investors will generally view an increase in debt as a positive sign for the firm's value.22. Studies have found that firms with high proportions of intangible assets are likely to use ____________ debt compared with firms with low proportions of intangible assets.A. moreB. the same amount ofC. lessD. either more or the same amount ofE. any amount of debt23. What three factors are important to consider in determining a target debt to equity ratio?A. Taxes, asset types, and pecking order and financial slackB. Asset types, uncertainty of operating income, and pecking order and financial slackC. Taxes, financial slack and pecking order, and uncertainty of operating incomeD. Taxes, asset types, and uncertainty of operating incomeE. None of the above.24. An exchange may offer:A. allow customers a 30 day money-back guarantee on the firm's product.B. allow customers a 90 day warranty on the firm's product from defects.C. allow bondholders to exchange some debt for stock.D. allow stockholders to exchange some of their stock for debt.E. Both C and D.25. Which of the following is not empirically true when formulating capital structure policy?A. Some firms use no debt.B. Most corporations have low debt-asset ratios.C. There are no differences in the capital-structure of different industries.D. Debt levels across industries vary widely.E. Debt ratios in most countries are considerably less than 100%.26. When shareholders pursue selfish strategies such as taking large risks or paying excessive dividends, these will result in:A. no action by debtholders since these are equity holder concerns.B. positive agency costs, as bondholders impose various restrictions and covenants which will diminish firm value.C. investments of the same risk class that the firm is in.D. undertaking scale enhancing projects.E. lower agency costs, as shareholders have more control over the firm's assets.27. Indirect costs of bankruptcy are born principally by:A. bondholders.B. stockholders.C. managers.D. the federal government.E. the firm's suppliers.28. The value of a firm in financial distress is diminished if the firm:A. is declared bankrupt and proceeds to be liquidated.B. is declared insolvent and undergoes financial reorganization.C. is a partnership.D. Both A and C.E. Both A and B.29. Covenants restricting the use of leasing and additional borrowings primarily protect:A. the equityholders from added risk of default.B. the debtholders from the added risk of dilution of their claims.C. the debtholders from the transfer of assets.D. the management from having to pay agency costs.E. None of the above.30. If a firm issues debt but writes protective and restrictive covenants into the loan contract, then the firm's debt may be issued at a _____ interest rate compared with otherwise similar debt.A. significantly higherB. slightly higherC. equalD. lowerE. Either A or B31. When graphing firm value against debt levels, the debt level that maximizes the value of the firm is the level where:A. the increase in the present value of distress costs from an additional dollar of debt is greater than the increase in the present value of the debt tax shield.B. the increase in the present value of distress costs from an additional dollar of debt is equal to the increase in the present value of the debt tax shield.C. the increase in the present value of distress costs from an additional dollar of debt is less than the increase of the present value of the debt tax shield.D. distress costs as well as debt tax shields are zero.E. distress costs as well as debt tax shields are maximized.32. When firms issue more debt, the tax shield on debt _____, the agency costs on debt (i.e., costs of financial distress) _____, and the agency costs on equity _____.A. increases; increase; increaseB. decreases; decrease; decreaseC. increases; increase; decreaseD. decreases; decrease; increaseE. increases; decrease; decrease33. The free cash flow hypothesis states:A. that firms with greater free cash flow will pay more in dividends reducing the risk of financial distress.B. that firms with greater free cash flow should issue new equity to force managers to minimize wasting resources and to work harder.C. that issuing debt requires interest and principal payments reducing the potential of management to waste resources.D. Both A and C.E. Both B and C.34. Issuing debt instead of new equity in a closely held firm more likely:A. causes the owner-manager to work less hard and shirk their duties as they have less capital at risk.B. causes the owner-manager to consume more perquisites because the cost is passed to the debtholders.C. causes both more shirking and perquisite consumption since the government provides a tax shield on debt.D. causes agency costs to fall as owner-managers do not need to worry about other shareholders.E. causes the owner-manager to reduce shirking and perquisite consumption as the excess cash flow must be used to meet debt payments.35. The pecking order states how financing should be raised. In order to avoid asymmetric information problems and misinterpretation of whether management is sending a signal on security overvaluation, the firm's first rule is to:A. finance with internally generated funds.B. always issue debt then the market won't know when management thinks the security is overvalued.C. issue new equity first.D. issue debt first.E. None of the above.36. Growth opportunities _______ the _____ of debt financing.A. increase; advantageB. decrease; advantageC. decrease; disadvantageD. Both A and CE. None of the above37. Which of the following industries would tend to have the highest leverage?A. DrugsB. ComputerC. PaperD. ElectronicsE. Biological products38. The introduction of personal taxes may reveal a disadvantage to the use of debt if the:A. personal tax rate on the distribution of income to stockholders is less than the personal tax rate on interest income.B. personal tax rate on the distribution of income to stockholders is greater than the personal tax rate on interest income.C. personal tax rate on the distribution of income to stockholders is equal to the personal tax rate on interest income.D. personal tax rate on interest income is zero.E. None of the above.39. In Miller's model, when the quantity [(1 - Tc)(1 - Ts) = (1 - Tb)], then:A. the firm should hold no debt.B. the value of the levered firm is greater than the value of the unlevered firm.C. the tax shield on debt is exactly offset by higher personal taxes paid on interest income.D. the tax shield on debt is exactly offset by higher levels of dividends.E. the tax shield on debt is exactly offset by higher capital gains.40. In a Miller equilibrium, what type of investments do high tax bracket investors tend to hold?A. BondsB. StocksC. DebenturesD. Both stocks and bonds.E. Neither stocks nor bonds.41. The TrunkLine Company will earn $60 in one year if it does well. The debtholders are promised payments of $35 in one year if the firm does well. If the firm does poorly, expected earnings in one year will be $30 and the repayment will be $20 because of the dead weight cost of bankruptcy. The probability of the firm performing poorly or well is 50%. If bondholders are fully aware of these costs what will they pay for the debt? The interest rate on the bonds is 10%.A. $25.00B. $27.50C. $29.55D. $32.50E. $35.0042. The TrunkLine Company debtholders are promised payments of $35 if the firm does well, but will receive only $20 if the firm does poorly. Bondholders are willing to pay $25. The promised return to the bondholders is approximately:A. 2.9%B. 16.9%C. 27.3%D. 40.0%E. 100%43. An investment is available that pays a tax-free 6%. The corporate tax rate is 30%. Ignoring risk, what is the pre-tax return on taxable bonds?A. 4.20%B. 6.00%C. 7.67%D. 8.57%E. None of the above.44. Your firm has a debt-equity ratio of .60. Your cost of equity is 11% and your after-tax cost of debt is 7%. What will your cost of equity be if the target capital structure becomes a 50/50 mix of debt and equity?A. 9.50%B. 10.50%C. 11.00%D. 11.25%E. 12.00%45. The Aggie Company has EBIT of $50,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an all equity firm would be 14%. Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 15% rate on equity. Determine the value of Aggie.A. $120,000B. $162,948C. $258,537D. $263,080E. $332,14346. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?Corporate tax rate: 34%Personal tax rate on income from bonds: 30%Personal tax rate on income from stocks: 30%A. $-0.050B. $0.006C. $0.246D. $0.340E. $0.66047. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?Corporate tax rate: 34%Personal tax rate on income from bonds: 20%Personal tax rate on income from stocks: 0%A. $0.175B. $0.472C. $0.528D. $0.825E. None of the above48. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?Corporate tax rate: 34%Personal tax rate on income from bonds: 50%Personal tax rate on income from stocks: 10%A. $-0.050B. $-0.188C. $0.188D. $0.633E. None of the above49. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?Corporate tax rate: 34%Personal tax rate on income from bonds: 10%Personal tax rate on income from stocks: 50%A. $-0.050B. $-0.188C. $0.367D. $0.633E. None of the above50. The Aggie Company has EBIT of $70,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an all equity firm would be 14%. Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and a 15% rate on equity. Determine the value of Aggie.A. $120,000B. $162,948C. $258,537D. $263,080E. $355,93851. Suppose a Miller equilibrium exists with a corporate tax rate of 30% and a personal tax rate on income from bonds of 35%. What is the personal tax rate on income from stocks?A. 0.0%B. 7.1%C. 10.05%D. 45.5%E. None of the above52. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?Corporate tax rate: 40%Personal tax rate on income from bonds: 20%Personal tax rate on income from stocks: 30%A. $-0.475B. $0.475C. $0.525D. $0.633E. None of the above53. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?Corporate tax rate: 34%Personal tax rate on income from bonds: 20%Personal tax rate on income from stocks: 50%A. $-0.050B. $-0.188C. $0.367D. $0.588E. None of the above54. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?Corporate tax rate: 34%Personal tax rate on income from bonds: 20%Personal tax rate on income from stocks: 30%A. $-0.050B. $0.006C. $0.246D. $0.340E. $0.42355. Given the following information, leverage will add how much value to the unlevered firm per dollar of debt?Corporate tax rate: 30%Personal tax rate on income from bonds: 20%Personal tax rate on income from stocks: 0%A. $0.125B. $0.472C. $0.528D. $0.825E. None of the above56. Holly Berry Incorporated will earn $40 in one year if it does well. The debtholders are promised payments of $25 in one year if the firm does well. If the firm does poorly, expected earnings in one year will be $20 and the repayment will be $15 because of the dead weight cost of bankruptcy. The probability of the firm performing poorly or well is 50%. If bondholders are fully aware of these costs what will they pay for the debt? The interest rate on the bonds is 8%.A. $18.52B. $30.00C. $32.55D. $35.75E. $37.0457. Holly Berry Incorporated debtholders are promised payments of $25 if the firm does well, but will receive only $20 if the firm does poorly. Bondholders are willing to pay $15. The promised return to the bondholders is approximately:A. 5.65%B. 45.65%C. 50.00%D. 66.67%E. 100.00%58. An investment is available that pays a tax-free 7%. The corporate tax rate is 40%. Ignoring risk, what is the pre-tax return on taxable bonds?A. 4.20%B. 7.00%C. 7.47%D. 11.67%E. None of the aboveEssay Questions59. What are the advantages of a prepackaged bankruptcy for a firm? What are the disadvantages?60. Is there an easily identifiable debt-equity ratio that will maximize the value of a firm? Why or why not?61. Describe some of the sources of business risk and financial risk. Do financial decision makers have the ability to "trade off" one type of risk for the other?62. The Do-All-Right Marketing Research firm has promised payments to its bondholders that total $100. The company believes that there is a 85% chance that the cash flow will be sufficient to meet these claims. However, there is a 15% chance that cash flows will fall short, in which case total earnings are expected to be $65. If the bonds sell in the market for $84, what is an estimate of the bankruptcy costs for Do-All-Right? Assume a cost of debt of 10%.63. Establishing a capital structure for a firm is not simple. Although financial theory guides the process, there is no simple formula. List and explain four main items that one should consider in determining the capital structure.Wigdor Manufacturing is currently all equity financed, has an EBIT of $2 million, and is in the 34% tax bracket. Louis, the company's founder, is the lone shareholder.64. If the firm were to convert $4 million of equity into debt at a cost of 10%, what would be the total cash flow to Louis if he holds all the debt? Compare this to Louis' total cash flow if the firm remains unlevered.65. Assume that all earnings are paid out as dividends. Now consider the fact that Louis must pay personal tax on the firm's cash flow. Louis pays taxes on interest at a rate of 33%, but pays taxes on dividends at a rate of 28%. Calculate the total cash flow to Louis after he pays personal taxes.66. Consider an economy in which there are three groups of investors and no others.There are no personal taxes on income from stocks. An investment is available that pays atax-free 4%. The corporate tax rate is 50%. Total corporate income before earnings and taxes (EBIT) is $224 million forever. What is the maximum debt-to-equity ratio for the economy as a whole?67. The All-Mine Corporation is deciding whether to invest in a new project. The project would have to be financed by equity, the cost is $2,000 and will return $2,500 or 25% in one year. The discount rate for both bonds and stock is 15% and the tax rate is zero. The predicted cash flows are $4,500 in a good economy, $3,000 in an average economy and $1,000 in a poor economy. Each economic outcome is equally likely and the promised debt repayment is $3,000. Should the company take the project? What is the value of firm and its components before and after the project addition?68. Define and describe the direct and indirect costs of bankruptcy. Give three examples of each.69. What is the pecking order theory and what are the implications that arise from this theory?Chapter 17 Capital Structure: Limits to the Use of Debt Answer KeyMultiple Choice Questions1. The explicit costs, such as the legal expenses, associated with corporate default are classified as _____ costs.A. flotationB. beta conversionC. direct bankruptcyD. indirect bankruptcyE. unleveredDifficulty level: EasyTopic: DIRECT BANKRUPTCY COSTSType: DEFINITIONS2. The costs of avoiding a bankruptcy filing by a financially distressed firm are classified as _____ costs.A. flotationB. direct bankruptcyC. indirect bankruptcyD. financial solvencyE. capital structureDifficulty level: EasyTopic: INDIRECT BANKRUPTCY COSTSType: DEFINITIONS3. The explicit and implicit costs associated with corporate default are referred to as the _____ costs of a firm.A. flotationB. default betaC. direct bankruptcyD. indirect bankruptcyE. financial distressDifficulty level: EasyTopic: FINANCIAL DISTRESS COSTSType: DEFINITIONS4. Indirect costs of financial distress:A. effectively limit the amount of equity a firm issues.B. serve as an incentive to increase the financial leverage of a firm.C. include direct costs such as legal and accounting fees.D. tend to increase as the debt-equity ratio decreases.E. include the costs incurred by a firm as it tries to avoid seeking bankruptcy protection. Difficulty level: EasyTopic: FINANCIAL DISTRESS COSTSType: DEFINITIONS5. The legal proceeding for liquidating or reorganizing a firm operating in default is called a:A. tender offer.B. bankruptcy.C. merger.D. takeover.E. proxy fight.Difficulty level: EasyTopic: BANKRUPTCYType: DEFINITIONS6. The value of a firm is maximized when the:A. cost of equity is maximized.B. tax rate is zero.C. levered cost of capital is maximized.D. weighted average cost of capital is minimized.E. debt-equity ratio is minimized.Difficulty level: EasyTopic: CAPITAL STRUCTUREType: DEFINITIONS7. The optimal capital structure has been achieved when the:A. debt-equity ratio is equal to 1.B. weight of equity is equal to the weight of debt.C. cost of equity is maximized given a pre-tax cost of debt.D. debt-equity ratio is such that the cost of debt exceeds the cost of equity.E. debt-equity ratio selected results in the lowest possible weighed average cost of capital. Difficulty level: EasyTopic: CAPITAL STRUCTUREType: DEFINITIONS8. In a world with taxes and financial distress, when a firm is operating with the optimal capital structure:I. the debt-equity ratio will also be optimal.II. the weighted average cost of capital will be at its minimal point.III. the required return on assets will be at its maximum point.IV. the increased benefit from additional debt is equal to the increased bankruptcy costs of that debt.A. I and IV onlyB. II and III onlyC. I and II onlyD. II, III, and IV onlyE. I, II, and IV onlyDifficulty level: MediumTopic: OPTIMAL CAPITAL STRUCTUREType: CONCEPTS9. The optimal capital structure will tend to include more debt for firms with:A. the highest depreciation deductions.B. the lowest marginal tax rate.C. substantial tax shields from other sources.D. lower probability of financial distress.E. less taxable income.Difficulty level: MediumTopic: OPTIMAL CAPITAL STRUCTUREType: CONCEPTS10. The optimal capital structure of a firm _____ the marketed claims and _____ the nonmarketed claims against the cash flows of the firm.A. minimizes; minimizesB. minimizes; maximizesC. maximizes; minimizesD. maximizes; maximizesE. equates; (leave blank)Difficulty level: MediumTopic: OPTIMAL CAPITAL STRUCTUREType: CONCEPTS11. The optimal capital structure:A. will be the same for all firms in the same industry.B. will remain constant over time unless the firm makes an acquisition.C. of a firm will vary over time as taxes and market conditions change.D. places more emphasis on the operations of a firm rather than the financing of a firm.E. is unaffected by changes in the financial markets.Difficulty level: EasyTopic: OPTIMAL CAPITAL STRUCTUREType: CONCEPTS12. The basic lesson of MM theory is that the value of a firm is dependent upon the:A. capital structure of the firm.B. total cash flows of the firm.C. percentage of a firm to which the bondholders have a claim.D. tax claim placed on the firm by the government.E. size of the stockholders claims on the firm.Difficulty level: MediumTopic: M&M THEORYType: CONCEPTS13. Corporations in the U.S. tend to:A. minimize taxes.B. underutilize debt.C. rely less on equity financing than they should.D. have extremely high debt-equity ratios.E. rely more heavily on bonds than stocks as the major source of financing.Difficulty level: EasyTopic: OBSERVED CAPITAL STRUCTURESType: CONCEPTS14. In general, the capital structures used by U.S. firms:A. tend to overweigh debt in relation to equity.B. are easily explained in terms of earnings volatility.C. are easily explained by analyzing the types of assets owned by the various firms.D. tend to be those which maximize the use of the firm's available tax shelters.E. vary significantly across industries.Difficulty level: EasyTopic: OBSERVED CAPITAL STRUCTURESType: CONCEPTS。
(完整版)公司理财-罗斯课后习题答案
(完整版)公司理财-罗斯课后习题答案-CAL-FENGHAI-(2020YEAR-YICAI)_JINGBIAN第一章1.在所有权形式的公司中,股东是公司的所有者。
股东选举公司的董事会,董事会任命该公司的管理层。
企业的所有权和控制权分离的组织形式是导致的代理关系存在的主要原因。
管理者可能追求自身或别人的利益最大化,而不是股东的利益最大化。
在这种环境下,他们可能因为目标不一致而存在代理问题。
2.非营利公司经常追求社会或政治任务等各种目标。
非营利公司财务管理的目标是获取并有效使用资金以最大限度地实现组织的社会使命。
3.这句话是不正确的。
管理者实施财务管理的目标就是最大化现有股票的每股价值，当前的股票价值反映了短期和长期的风险、时间以及未来现金流量。
4.有两种结论。
一种极端,在市场经济中所有的东西都被定价。
因此所有目标都有一个最优水平，包括避免不道德或非法的行为，股票价值最大化。
另一种极端,我们可以认为这是非经济现象,最好的处理方式是通过政治手段。
一个经典的思考问题给出了这种争论的答案:公司估计提高某种产品安全性的成本是30美元万。
然而,该公司认为提高产品的安全性只会节省20美元万。
请问公司应该怎么做呢?”5.财务管理的目标都是相同的,但实现目标的最好方式可能是不同的,因为不同的国家有不同的社会、政治环境和经济制度。
6.管理层的目标是最大化股东现有股票的每股价值。
如果管理层认为能提高公司利润，使股价超过35美元,那么他们应该展开对恶意收购的斗争。
如果管理层认为该投标人或其它未知的投标人将支付超过每股35美元的价格收购公司,那么他们也应该展开斗争。
然而,如果管理层不能增加企业的价值,并且没有其他更高的投标价格,那么管理层不是在为股东的最大化权益行事。
现在的管理层经常在公司面临这些恶意收购的情况时迷失自己的方向。
7.其他国家的代理问题并不严重,主要取决于其他国家的私人投资者占比重较小。
较少的私人投资者能减少不同的企业目标。
罗斯公司理财练习题(打印版)
罗斯公司理财练习题（打印版）# 罗斯公司理财练习题## 一、选择题1. 以下哪项不是公司理财的主要目标？A. 利润最大化B. 股东财富最大化C. 企业价值最大化D. 社会责任最大化2. 罗斯公司计划进行一项投资，预计初始投资为50万元，未来5年的现金流分别为10万元、15万元、20万元、25万元和30万元。
假设贴现率为10%，该投资的净现值（NPV）是多少？A. 10万元B. 15万元C. 20万元D. 25万元## 二、计算题1. 罗斯公司正在考虑一项新项目，该项目需要初始投资100万元。
预计该项目在未来3年内每年可以产生40万元的现金流。
假设公司的加权平均资本成本（WACC）为8%，请计算该项目的净现值（NPV）。
2. 罗斯公司计划发行一批债券，面值为1000元，票面利率为5%，期限为5年，每年支付一次利息。
如果市场利率为6%，该债券的理论价格是多少？## 三、简答题1. 简述公司理财中的代理问题，并举例说明如何通过公司治理机制来解决这一问题。
2. 描述资本结构决策对公司价值的影响，并解释为什么在不同情况下，公司可能会选择不同的资本结构。
## 四、案例分析题罗斯公司是一家生产型企业，目前面临资金短缺的问题。
公司管理层提出了两种融资方案：方案一是发行股票，方案二是发行债券。
请分析这两种方案对公司财务状况和股东财富的影响，并给出你的建议。
## 五、论述题论述公司进行跨国投资时需要考虑的主要财务因素，并分析这些因素如何影响公司的全球战略。
以上练习题涵盖了公司理财的多个重要领域，包括目标设定、投资决策、融资决策和跨国投资等。
通过这些练习，可以帮助学生更好地理解和掌握公司理财的基本原理和方法。
希望同学们认真完成这些练习题，提高自己的理财能力。
罗斯《公司理财》(第9版)章节题库(第13~19章)【圣才出品】
圣才电子书 十万种考研考证电子书、题库视频学习平台
解：公司的税后债务资本成本为：9%×（1-33%）=6.03% 公司的加权平均资本成本为：6.03%×35%+15%×65%=11.86%
经营杠杆系数＝息税前利润变动率/产销业务量变动率 经营杠杆是用来衡量经营风险的。在其他因素不变的情况下，固定的生产经营成本的存 在导致企业经营杠杆作用，而且固定成本越高，经营杠杆系数越大，经营风险越大。如果固 定成本为零，经营杠杆系数等于 1。 （2）财务杠杆，即由于债务存在而导致普通股股东权益变动大于息税前利润变动的杠 杆效应。衡量普通股股东的获利能力一般是用普通股的每股利润。由于债务利息的存在，普 通股每股利润的变动会超过息税前利润变动的幅度，这就是财务杠杆效应。财务杠杆反映的 是每股利润变动要大于息税前利润变动。其计算公式为：
2 / 64
圣才电子书 十万种考研考证电子书、题库视频学习平台
3．经营杠杆与财务杠杆（华中科大 2001 研；财政所 2000 研；南开大学 1999 研） 答：（1）经营杠杆，即由于固定成本的存在而导致息税前利润变动大于产销业务量变 动的杠杆效应。经营杠杆作用的衡量指标即经营杠杆系数。经营杠杆系数是指息税前利润变 动率相当于产销业务量变动率的倍数。其公式为：
S
S
B
×RS+
S
B B
×RB×（1-tC）=
1
1 0.4
×26.23%+
1
0.4 0.4
×6%×
（1-25%）=20%
2．假设某公司债务资本成本为 9％，所得税率为 33％，权益成本为 15％。公司计划 按照以下资本结构筹集资金：35％的债务和 65％的股权，计算该公司的加权平均资本成本。 （东北财大 2006 研）
罗斯《公司理财》期末试题和模拟题
《公司理财》复习资料一、单项选择题1、下列各项中，不能协调所有者与债权人之间矛盾的方式是（A）A.市场对公司强行接收或吞并B.债权人通过合同实施限制性借款C.债权人停止借款D.债权人收回借款2、在下列各项中，能够反映上市公司价值最大化目标实现程度的是（C）A.总资产报酬率B.净资产收益率C.每股市价D.每股利润3、作为财务管理目标，既能够考虑资金的时间价值和投资风险，又能避免企业的短期行为的是（B）A. 利润最大化B. 企业价值最大化C. 每股利润最大化D. 资本利润率最大化4、将利率分为基准利率和套算利率的依据是（A）A．利率的变动关系B．资金的供求关系C．利率形成机制D．利率的构成5、按照证券交易的方式和次数，将金融市场分为（D）A．现货市场和期货市场B．第一市场和第二市场C．短期金融市场和长期金融市场D．发行市场和交易市场6、在没有通货膨胀的情况下，纯利率是指（D）A．投资期望收益率B．银行贷款基准利率C．社会实际平均收益率D．没有风险的均衡点利率7、某企业2003年主营业务收入净额为36000万元，流动资产平均余额为4000万元，固定资产平均余额为8000万元。
假定没有其他资产，则该企业2003年的总资产周转率（A）次A．3.0B．3.4C．2.9D．3.28、在杜邦财务分析体系中，综合性最强的财务比率是（A）A．权益报酬率B．总资产净利率C．总资产周转率D．营业净利率9、下列各项中，不会影响流动比率的业务是（A）A．用现金购买短期债券B．用现金购买固定资产C．用存货进行对外长期投资D．从银行取得长期借款10、下列各项中，可能导致企业资产负债率变化的经济业务是（C）A．收回应收账款B．用现金购买债券C．接受所有者投资转入的固定资产D．以固定资产对外投资（按账面价值作价）11、某企业税前经营利润100万元，利息费用10万元，平均所得税率为30%，则该企业的净利润为（A）A．63万元B．80万元C．20万元D．97万元12、下列指标属于企业长期偿债能力衡量指标的是（C）A．固定资产周转率B．速动比率C．已获利息倍数D．总资产周转率13、企业大量增加速动资产可能导致的结果是（B）A．减少资金的机会成本B．增加资金的机会成本C．增加财务风险D．提高流动资产的收益率14、若流动比率大于1，下列说法正确的是（A）A．营运资本大于0B．短期偿债能力绝对有保证C．现金比率大于1D．速动比率大于115、某企业于年初存入银行10000元，假定年利息率为12%，每年复利两次。
罗斯公司理财题库全集
罗斯公司理财题库全集Chapter 26Short-Term Finance and Planning Multiple Choice Questions1. The length of time between the acquisition of inventory and the collection of cash from receivables is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.2. The length of time between the acquisition of inventory and its sale is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.3. The length of time between the sale of inventory and the collection of cash from receivables is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.4. The length of time between the acquisition of inventory bya firm and the payment by the firm for that inventory is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.5. The length of time between the payment for inventory and the collection of cash from receivables is called the:A. operating cycle.B. inventory period.C. accounts receivable period.D. accounts payable period.E. cash cycle.6. Costs of the firm that rise with increased levels of investment in its current assets are called _____ costs.A. carryingB. shortageC. orderD. safetyE. trading7. Costs of the firm that fall with increased levels of investment in its current assets are called _____ costs.A. carryingB. shortageC. debtD. equityE. payables8. The forecast of cash receipts and disbursements for the next planning period is called a:A. pro forma income statement.B. statement of cash flows.C. cash budget.D. receivables analysis.E. credit analysis.9. A prearranged, short-term bank loan made on a formal or informal basis, and typically reviewed for renewal annually, is called a:A. letter of credit.B. cleanup loan.C. compensating balance.D. line of credit.E. roll-over.10. A prearranged credit agreement with a bank typically open for two or more years is called a:A. letter of credit.B. cleanup loan.C. compensating balance.D. line of credit.E. revolving credit arrangement.11. A fraction of the available credit on a loan agreement deposited by the borrower with the bank in a low or non-interest-bearing account is called a:A. compensating balance.B. cleanup loan.C. letter of credit.D. line of credit.E. roll-over.12. A _____ issued by a bank is a promise by that bank to makea loan if certain conditions are met.A. compensating balanceB. cleanup loanC. letter of creditD. line creditE. revolver13. A short-term loan where the lender holds the borrower's receivables as security is called:A. a compensating balance.B. assigned receivables financing.C. a letter of credit.D. factored receivables financing.E. a bond.14. A type of short-term loan where the borrower sells its receivables to the lender up-front, but at a discount to face value, is called:A. a compensating balance.B. assigned receivables financing.C. a letter of credit.D. factored receivables financing.E. a bond.15. A short-term loan secured by the borrower's inventory, either directly or via an intermediary, is called a(n):A. debenture.B. line of credit.C. banker's acceptance.D. compensating balance.E. inventory loan.16. Net working capital is defined as:A. the current assets in a business.B. the difference between current assets and current liabilities.C. the present value of short-term cash flows.D. the difference between all assets and liabilities.E. None of the above.17. Which one of the following is a source of cash?A. an increase in accounts receivableB. an increase in fixed assetsC. a decrease in long-term debtD. the payment of a cash dividendE. an increase in accounts payable18. Which of the following are uses of cash?I. marketable securities are soldII. the amount of inventory on hand is increasedIII. the firm takes out a long-term bank loanIV. payments are paid on accounts payableA. I and III onlyB. II and IV onlyC. I and IV onlyD. II and III onlyE. II, III and IV only19. Which one of the following will increase net working capital? Assume that the current ratio is greater than 1.0.A. using cash to pay an accounts payableB. uing cash to pay a long-term debtC. selling inventory at costD. collecting an accounts receivableE. using a long-term loan to buy inventory20. Which one of the following will decrease the net working capital of a firm? Assume that the current ratio is greater than 1.0.A. Selling inventory at a profitB. Collecting an accounts receivableC. Paying a payment on a long-term debtD. Selling a fixed asset for book valueE. Paying an accounts payable21. Which one of the following will decrease the operating cycle?A. Paying accounts payable fasterB. Discontinuing the discount given for early payment of an accounts receivableC. Decreasing the inventory turnover rateD. Collecting accounts receivable fasterE. Increasing the accounts payable turnover rate22. Which one of the following will decrease the operating cycle?A. Decreasing the days sales in inventoryB. Decreasing the days in accounts payableC. Decreasing the cash cycle by increasing the accounts payable periodD. Decreasing the accounts receivable turnover rateE. Decreasing the speed at which inventory is sold23. The short-term financial policy that a firm adopts will be reflected in:A. the size of the firm's investment in current assets.B. the financing of current assets.C. the financing of fixed assets.D. Both A and B.E. Both A and C.24. Which one of the following will not affect the operating cycle?A. decreasing the payables turnover from 7 times to 6 timesB. increasing the days sales in receivablesC. decreasing the inventory turnover rateD. increasing the average receivables balanceE. decreasing the credit repayment times for the firm'scustomers25. Which one of the following will increase the cash cycle?A. Improving the cash discounts given to customers who pay their accounts earlyB. Having a larger percentage of customers paying with cash instead of creditC. Buying less raw materials to have on handD. Paying your suppliers earlier to receive the discount they offerE. Ordering raw materials inventory only when you need it26. An increase in which one of the following will decrease the cash cycle, all else equal?A. Payables turnoverB. Days sales in inventoryC. Operating cycleD. Inventory turnover rateE. Accounts receivable period27. ABC Manufacturing historically produced products that were held in inventory until they could be sold to a customer. The firm is now changing its policy and only producing a product when it receives an actual order from a customer. All else equal, this change will:A. increase the operating cycle.B. lengthen the accounts receivable period.C. shorten the accounts payable period.D. decrease the cash cycle.E. decrease the inventory turnover rate.28. Which one of the following statements concerning the cash cycle is correct?A. The cash cycle is equal to the operating cycle minus theinventory period.B. A negative cash cycle is actually preferable to a positive cash cycle.C. Granting credit to slower paying customers tends to decrease the cash cycle.D. The cash cycle plus the accounts receivable period is equal to the operating cycle.E. The most desirable cash cycle is the one that equals zero days.29. Which one of the following statements is correct concerning the cash cycle?A. The longer the cash cycle, the more likely a firm will need external financing.B. Increasing the accounts payable period increases the cash cycle.C. A positive cash cycle is preferable to a negative cash cycle.D. The cash cycle can exceed the operating cycle if the payables period is equal to zero.E. Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.。
- 1、下载文档前请自行甄别文档内容的完整性，平台不提供额外的编辑、内容补充、找答案等附加服务。
- 2、"仅部分预览"的文档,不可在线预览部分如存在完整性等问题,可反馈申请退款(可完整预览的文档不适用该条件!)。
- 3、如文档侵犯您的权益，请联系客服反馈,我们会尽快为您处理(人工客服工作时间：9:00-18:30)。
Chapter 19 Dividends and Other Payouts Answer KeyMultiple Choice Questions1. Payments made out of a firm's earnings to its owners in the form of cash or stock are called:A. dividends.B. distributions.C. share repurchases.D. payments-in-kind.E. stock splits.Difficulty level: EasyTopic: DIVIDENDSType: DEFINITIONS2. Payments made by a firm to its owners from sources other than current or accumulated earnings are called:A. dividends.B. distributions.C. share repurchases.D. payments-in-kind.E. stock splits.Difficulty level: EasyTopic: DISTRIBUTIONSType: DEFINITIONS3. A cash payment made by a firm to its owners in the normal course of business is called a:A. share repurchase.B. liquidating dividend.C. regular cash dividend.D. special dividend.E. extra cash dividend.Difficulty level: EasyTopic: REGULAR CASH DIVIDENDSType: DEFINITIONS4. A cash payment made by a firm to its owners when some of the firm's assets are sold off is ca lled a:A. liquidating dividend.B. regular cash dividend.C. special dividend.D. extra cash dividend.E. share repurchase.Difficulty level: EasyTopic: LIQUIDATING DIVIDENDSType: DEFINITIONS5. The date on which the board of directors passes a resolution authorizing payment of a dividend to the shareholders is the _____ date.A. ex-rightsB. ex-dividendC. recordD. paymentE. declarationDifficulty level: EasyTopic: DECLARATION DATEType: DEFINITIONS6. The date before which a new purchaser of stock is entitled to receive a declared dividen d, but on or after which she does not receive the dividend, is called the _____ date.A. ex-rightsB. ex-dividendC. recordD. paymentE. declarationDifficulty level: EasyTopic: EX-DIVIDEND DATEType: DEFINITIONS7. The date by which a stockholder must be registered on the firm's roll as having share ownership in order to receive a declared dividend is called the:A. ex-rights date.B. ex-dividend date.C. date of record.D. date of payment.E. declaration date.Difficulty level: EasyTopic: DATE OF RECORDType: DEFINITIONS8. The date on which the firm mails out its declared dividends is called the:A. ex-rights date.B. ex-dividend date.C. date of record.D. date of payment.E. declaration date.Difficulty level: EasyTopic: DATE OF PAYMENTType: DEFINITIONS9. The ability of shareholders to undo the dividend policy of the firm and create an alternative dividend payment policy via reinvesting dividends or selling shares of stock is called (a):A. perfect foresight model.B. MM Proposition I.C. capital structure irrelevancy.D. homemade leverage.E. homemade dividends.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: DEFINITIONS10. The market's reaction to the announcement of a change in the firm's dividend payout is likely the:A. information content effect.B. clientele effect.C. efficient markets hypothesis.D. MM Proposition I.E. MM Proposition II.Difficulty level: MediumTopic: INFORMATION CONTENT EFFECTType: DEFINITIONS11. The observed empirical fact that stocks attract pa rticular investors based on the firm's dividend policy and the resulting tax impact on investors is called the:A. information content effect.B. clientele effect.C. efficient markets hypothesis.D. MM Proposition I.E. MM Proposition II.Difficulty level: EasyTopic: CLIENTELE EFFECTType: DEFINITIONS12. A _____ is an alternative method to cash dividends which is used to pay out a firm's earnings to shareholders.A. mergerB. acquisitionC. payment-in-kindD. stock splitE. share repurchaseDifficulty level: EasyTopic: SHARE REPURCHASEType: DEFINITIONS13. A payment made by a firm to its owners in the form of new shares of stock is ca lled a _____ dividend.A. stockB. normalC. specialD. extraE. liquidatingDifficulty level: EasyTopic: STOCK DIVIDENDSType: DEFINITIONS14. An increase in a firm's number of shares outstanding without any change in owners' equity is called a:A. special dividend.B. stock split.C. share repurchase.D. tender offer.E. liquidating dividend.Difficulty level: EasyTopic: STOCK SPLITSType: DEFINITIONS15. The difference between the highest and lowest prices at which a stock has traded is called its:A. average price.B. bid-ask spread.C. trading range.D. opening price.E. closing price.Difficulty level: EasyTopic: TRADING RANGEType: DEFINITIONS16. In a reverse stock split:A. the number of shares outstanding increases and owners' equity decreases.B. the firm buys back existing shares of stock on the open market.C. the firm sells new shares of stock on the open market.D. the number of shares outstanding decreases but owners' equity is unchanged.E. shareholders make a cash payment to the firm.Difficulty level: EasyTopic: REVERSE SPLITSType: DEFINITIONS17. The last date on which you can purchase shares of stock and still receive the dividend is the date _____ business day(s) prior to the date of record.A. zeroB. oneC. threeD. fiveE. sevenDifficulty level: EasyTopic: DIVIDEND PAYMENTSType: CONCEPTS18. Leslie purchased 100 shares of GT, Inc. stock on Wednesday, June 7th. Marti purchased 100 shares of GT, Inc. stock on Thursday, July 8th. GT declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st. Which one of the following statements concerning the dividend paid on August 1st is correct given this information?A. Neither Leslie nor Marti are entitled to the dividend.B. Leslie is entitled to the dividend but Marti is not.C. Marti is entitled to the dividend but Leslie is not.D. Both Marti and Leslie are entitled to the dividend.E. Both Marti and Leslie are entitled to one-half of the dividend amount.Difficulty level: MediumTopic: DIVIDEND PAYMENTSType: CONCEPTS19. All else equal, the market value of a stock will tend to decrease by roughly the amount of the dividend on the:A. dividend declaration date.B. ex-dividend date.C. date of record.D. date of payment.E. day after the date of payment.Difficulty level: MediumTopic: DIVIDEND PAYMENTSType: CONCEPTS20. Which one of the following is an argument in favor of a low dividend policy?A. the tax on capital gains is deferred until the gain is realizedB. few, if any, positive net present value projects are available to the firmC. a preponderance of stockholders have minimal taxable incomeD. a majority of stockholders have other investment opportunities that offer higher rewards with similar risk characteristicsE. corporate tax rates exceed personal tax ratesDifficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS21. The fact that flotation costs can be significant is justification for:A. a firm to issue larger dividends than its closest competitors.B. a firm to maintain a constant dividend policy even if it frequently has to issue new shares of stock to do so.C. maintaining a constant dividend policy even when profits decline significantly.D. maintaining a high dividend policy.E. maintaining a low dividend policy and rarely issuing extra dividends.Difficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS22. Which of the following may tend to keep dividends low?I. a state law restricting dividends in excess of retained earningsII. a term contained in bond indenture agreementsIII. the desire to maintain constant dividends over timeIV. flotation costsA. II and III onlyB. I and IV onlyC. II, III, and IV onlyD. I, II, and III onlyE. I, II, III, and IVDifficulty level: MediumTopic: FACTORS FOR LOW DIVIDENDSType: CONCEPTS23. Ignoring capital gains as an alternative, the tax law changes in 2003 tend to favor a:A. lower dividend policy.B. constant dividend policy.C. zero-dividend policy.D. higher dividend policy.E. restrictive dividend policy.Difficulty level: EasyTopic: FACTORS FOR HIGH DIVIDENDSType: CONCEPTS24. Which of the following are factors that favor a high dividend policy?I. stockholders desire for current incomeII. tendency for higher stock prices for high dividend paying firmsIII. investor dislike of uncertaintyIV. high percentage of tax-exempt institutional stockholdersA. I and III onlyB. II and IV onlyC. I, III, and IV onlyD. II, III, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: FACTORS FOR HIGH DIVIDENDSType: CONCEPTS25. An investor is more likely to prefer a high dividend payout if a firm:A. has high flotation costs.B. has few, if any, positive net present value projects.C. has lower tax rates than the investor.D. has a stock price that is increasing rapidly.E. offers high capital gains which are taxed at a favorable rate.Difficulty level: EasyTopic: FACTORS FOR HIGH DIVIDENDSType: CONCEPTS26. The information content of a dividend increase generally signals that:A. the firm has a one-time surplus of cash.B. the firm has few, if any, net present value projects to pursue.C. management believes that the future earnings of the firm will be strong.D. the firm has more cash than it needs due to sales declines.E. future dividends will be lower.Difficulty level: MediumTopic: INFORMATION CONTENTType: CONCEPTS27. Of the following factors, which one is considered to be the primary factor affecting a firm's dividend decision?A. personal taxes of company stockholdersB. consistent dividend policyC. attracting retail investorsD. attracting institutional investorsE. sustainable changes in earningsDifficulty level: MediumTopic: DIVIDEND SURVEY RESULTSType: CONCEPTS28. Financial managers:A. are reluctant to cut dividends.B. tend to ignore past dividend policies.C. tend to prefer cutting dividends every time quarterly earnings decline.D. prefer cutting dividends over incurring flotation costs.E. place little emphasis on dividend policy consistency.Difficulty level: EasyTopic: DIVIDEND SURVEY RESULTSType: CONCEPTS29. If you ignore taxes and transaction costs, a stock repurchase will:I. reduce the total assets of a firm.II. increase the earnings per share.III. reduce the PE ratio more than an equivalent stock dividend.IV. reduce the total equity of a firm.A. I and III onlyB. II and IV onlyC. I, II, and IV onlyD. I, III, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: STOCK REPURCHASEType: CONCEPTS30. From a tax-paying investor's point of view, a stock repurchase:A. is equivalent to a cash dividend.B. is more desirable than a cash dividend.C. has the same tax effects as a cash dividend.D. is more highly taxed than a cash dividend.E. creates a tax liability even if the investor does not sell any of the shares he owns.Difficulty level: MediumTopic: STOCK REPURCHASEType: CONCEPTS31. All else equal, a stock dividend will _____ the number of shares outstanding and _____ the value per share.A. increase; increaseB. increase; decreaseC. not change; increaseD. decrease; increaseE. decrease; decreaseDifficulty level: EasyTopic: STOCK DIVIDENDSType: CONCEPTS32. A small stock dividend is defined as a stock dividend of less tha n _____%.A. 10 to 15B. 15 to 20C. 20 to 25D. 25 to 30E. 30 to 35Difficulty level: EasyTopic: STOCK DIVIDENDSType: CONCEPTS33. Nu Tech, Inc. is a technology firm with good growth prospects. The firm wishes to do something to acknowledge the loyalty of its shareholders but needs all of its available cash to fund its rapid growth. The market price of its stock is currently trading in the middle of its preferred trading range. The firm could consider:A. issuing a liquidating dividend.B. a stock split.C. a reverse stock split.D. issuing a stock dividend.E. a special cash dividend.Difficulty level: MediumTopic: STOCK DIVIDENDType: CONCEPTS34. Which of the following are valid reasons for a firm to reduce or eliminate its cash dividends?I. The firm is on the verge of violating a bond restriction which requires a current ratio of 1.8 or higher.II. A firm has just received a patent on a new product for which there is strong market demand and it needs the funds to bring the product to the marketplace.III. The firm can raise new capital easily at a very low cost.IV. The tax laws have recently changed such that dividends are taxed at an investor's marginal rate while capital gains are tax exempt.A. I and III onlyB. II and IV onlyC. II, III, and IV onlyD. I, II, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: STOCK DIVIDENDSType: CONCEPTS35. A stock split:A. increases the total value of the common stock account.B. decreases the value of the retained earnings account.C. does not affect the total value of any of the equity accounts.D. increases the value of the capital in excess of par account.E. decreases the total owners' equity on the balance sheet.Difficulty level: MediumTopic: STOCK SPLITSType: CONCEPTS36. Stock splits are often used to:A. adjust the market price of a stock such that it falls within a preferred trading range.B. decrease the excess cash held by a firm.C. increase both the number of shares outstanding and the market price per share simultaneously.D. increase the total equity of a firm.E. adjust the debt-equity ratio such that it falls within a preferred range.Difficulty level: EasyTopic: STOCK SPLITSType: CONCEPTS37. Which of the following tend to increase the appeal of a firm's stock to the average investor?I. a cessation of dividends by a firm which has a long history of increasing dividendsII. the distribution of a special dividend by a dividend-paying firmIII. a reverse stock split for a low-priced stockIV. the declaration of a stock dividend by a growth firmA. I and III onlyB. II and IV onlyC. I, II, and IV onlyD. II, III, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: STOCK SPLITSType: CONCEPTS38. Wydex, Inc. stock is currently trading at $82 a share. The firm feels that its primary clientele can afford to spend between $2,000 and $2,500 to purchase a round lot of 100 shares. The firm should consider a:A. reverse stock split.B. liquidating dividend.C. stock dividend.D. stock split.E. special dividend.Difficulty level: MediumTopic: STOCK SPLITType: CONCEPTS39. A one-for-four reverse stock split will:A. increase the par value by 25%.B. increase the number of shares outstanding by 400%.C. increase the market value but not affect the par value per share.D. increase a $1 par value to $4.E. increase a $1 par value by $4.Difficulty level: MediumTopic: REVERSE STOCK SPLITSType: CONCEPTS40. A reverse stock split is sometimes used as a means of:A. decreasing the liquidity of a stock.B. decreasing the market value per share of stock.C. increasing the number of stockholders.D. keeping a firm's stock eligible for trading on a stock exchange.E. raising cash from current stockholders.Difficulty level: EasyTopic: REVERSE STOCK SPLITSType: CONCEPTS41. Which of the following lists events in chronological order from earliest to latest?A. date of record, declaration date, ex-dividend date.B. date of record, ex-dividend date, declaration date.C. declaration date, date of record, ex-dividend date.D. declaration date, ex-dividend date, date of record.E. ex-dividend date, date of record, declaration date.Difficulty level: MediumTopic: DIVIDEND DATESType: CONCEPTS42. In an efficient market, ignoring taxes and time value, the price of stock should:A. decrease by the amount of the dividend immediately on the declaration date.B. decrease by the amount of the dividend immediately on the ex-dividend date.C. increase by the amount of the dividend immediately on the declaration date.D. increase by the amount of the dividend immediately on the ex-dividend date.E. Both B and C.Difficulty level: MediumTopic: EX-DIVIDEND DATESType: CONCEPTS43. On the date of record the stock price drop is:A. a full adjustment for the dividend payment.B. a partial adjustment for the dividend payment because of the tax effect.C. zero because it happens on the ex-dividend date.D. zero because it happens on the payment date.E. None of the above.Difficulty level: MediumTopic: DATE OF RECORDType: CONCEPTS44. The use of homemade dividends allows stockholders to change the:A. return pattern of the firm by leveraging their position like the firm.B. cash payout received by selling off shares to receive current dividends or purchasing additional shares with the dividends, as desired.C. value of the company by sending dividend requirement letters to the home office of the corporation.D. Both A and C.E. Both B and C.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: CONCEPTS45. Homemade dividends are described by Modigliani and Miller to be the:A. dividend one pays oneself to avoid risky stocks.B. re-arrangement of the firm's dividend stream as management needs.C. re-arrangement of the firm's dividend stream by investors buying or selling their holdings in the stock.D. present value of all dividends to be paid.E. None of the above.Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: CONCEPTS46. The dividend-irrelevance proposition of Miller and Modigliani depends on the following relationship between investment policy and dividend policy:A. The level of investment does not influence or matter to the dividend decision.B. Once dividend policy is set the investment decision can be made as desired.C. The investment policy is set before the dividend decision and not changed by dividend policy.D. Since dividend policy is irrelevant there is no relationship between investment policy and dividend policy.E. Miller and Modigliani were only concerned about capital structure.Difficulty level: MediumTopic: DIVIDEND IRRELEVANCEType: CONCEPTS47. Dividends are relevant and dividend policy irrelevant when:A. cash dividends are always constant and dividend policy is changed as management needs.B. cash dividends are increased for one year while others are held constant, thus causing an increase in stock price, and dividend policy establishes the trade-off between dividends at different dates.C. cash dividends are always constant and dividend policy establishes the trade-off between dividends at different dates.D. cash dividends are increased for one payment while others are held constant and dividend policy is changed as management needs.E. None of the above.Difficulty level: MediumTopic: DIVIDEND RELEVANCEType: CONCEPTS48. A reverse split is when:A. the stock price gets too high for investors to purchase in round lots.B. the stock becomes too liquid and highly marketable.C. the stock price moves into the popular trading range.D. several old shares, such as 4, are replaced by 1 new share.E. None of the above.Difficulty level: EasyTopic: REVERSE SPLITType: CONCEPTS49. A firm announces that it is willing to purchase a number of shares back at various prices and shareholders have the option to indicate how many shares they are willing to sell at various prices. This process is called a:A. dividend creation model.B. secondary market transaction.C. free market sale.D. Dutch auction.E. None of the above.Difficulty level: EasyTopic: DUTCH AUCTIONType: CONCEPTS50. Characteristics of a sensible dividend policy include:A. over time pay out all free cash flowsB. set the current regular dividend consistent with a long-run target payout ratioC. use repurchases to distribute transitory cash flow increasesD. A and BE. All of the aboveDifficulty level: EasyTopic: CHARACTERISTICS OF SENSIBLE DIVIDEND POLICYType: CONCEPTS51. You owned 200 shares last year and received a stock dividend of 5% at the e nd of last year. The number of shares you now have is _____ and your wealth has increased by ______%.A. 10; 5B. 210; 5C. 210; 0D. 50,000; 5E. 50,000; 0# shares = 200(1.05) = 210The only change is in value per share.Difficulty level: EasyTopic: STOCK DIVIDENDSType: PROBLEMS52. The Rent It Company declared a dividend of $.60 a share on October 20th to holders of record on Monday, November 1st. The dividend is payable on December 1st. You purchased 100 shares of Rent It Company stock on Wednesday, October 27th. How much dividend income will you receive on December 1st from the Rent It Company?A. $0B. $1.50C. $6.00D. $15.00E. $60.00Dividend received = $.60 ⨯ 100 = $60.00Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS53. You purchased 200 shares of ABC stock on July 15th. On July 20th, you purchased another 100 shares and then on July 22st you purchased your final 200 shares of ABC stock. The company declared a dividend of $1.10 a share on July 5th to holders of record on Friday, July 23rd. The dividend is payable on July 31st. How much dividend income will you receive on July 31st from ABC?A. $0B. $220C. $330D. $440E. $550Dividend received = $1.10 ⨯ (200 + 100) = $330Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS54. The KatyDid Co. is paying a $1.25 per share dividend toda y. There are 120,000 shares outstanding with a par value of $1.00 per share. As a result of this dividend, the:A. retained earnings will decrease by $150,000.B. retained earnings will decrease by $120,000.C. common stock account will decrease by $150,000.D. common stock account will decrease by $120,000.E. capital in excess of par value account will decrease by $120,000.Decrease in retained earnings = $1.25 ⨯ 120,000 = $150,000Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS55. On May 18th, you purchased 1,000 shares of BuyLo stock. On June 5th, you sold 200 shares of this stock for $21 a share. You sold an additional 400 shares on July 8th at a price of $22.50 a share. The company declared a $.50 per share dividend on June 25th to holders of record as of Thursday, July 10th. This dividend is payable on July 31st. How much dividend income will you receive on July 31st as a result of your ownership of BuyLo stock?A. $100B. $200C. $300D. $400E. $500Dividend received = $.50 ⨯ (1,000 - 200) = $400Difficulty level: MediumTopic: STOCK DIVIDENDType: PROBLEMS56. You own 300 shares of Ab co, Inc. stock. The company has stated that it plans on issuing a dividend of $.60 a share one year from today and then issuing a final liquidating dividend of $2.20 a share two years from today. Your required rate of return is 9%. Ignoring taxes, what is the value of one share of this stock today?A. $2.36B. $2.40C. $2.62D. $2.80E. $2.85Value per share = ($.60 ÷ 1.091) + ($2.20 ÷ 1.092) = $2.40Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: PROBLEMS57. Priscilla owns 500 shares of Delta stock. It is January 1, 2006, and the company recently issued a statement that it will pay a $1.00 per share dividend on December 31, 2006 and a $.50 per share dividend on December 31, 2007. Priscilla does not want any dividend this year but does want as much dividend income as possible next year. Her required return on this stock is 12%. Ignoring taxes, what will Priscilla's homemade dividend per share be in 2007?A. $0B. $.50C. $1.50D. $1.62E. $1.68Homemade dividend = ($1.00 ⨯ 1.12) + $.50 = $1.62Difficulty level: MediumTopic: HOMEMADE DIVIDENDSType: PROBLEMS58. A firm has a market value equal to its book value. Currently, the firm has excess cash of $600 and other assets of $5,400. Equity is worth $6,000. The firm has 500 shares of stock outstanding and net income of $900. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?A. $1.20B. $1.50C. $1.80D. $2.00E. $2.40Price per share = $6,000 ÷ 500 = $12; Number of shares repurchased = $600 ÷ $12 = 50 shares; New EPS = $900 ÷ (500 - 50) = $2.00Difficulty level: MediumTopic: STOCK REPURCHASEType: PROBLEMS59. A firm has a market value equal to its book value. Currently, the firm has excess cash of $800 and other assets of $5,200. Equity is worth $6,000. The firm has 600 shares of stock outstanding and net income of $700. The firm has decided to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed?A. 480 sharesB. 500 sharesC. 520 sharesD. 540 sharesE. 560 sharesPrice per share = $6,000 ÷ 600 = $10; Number of shares repurchased = $800 ÷ $10 = 80; New number of shares outstanding = 600 - 80 = 520Difficulty level: MediumTopic: STOCK REPURCHASEType: PROBLEMS60. A firm has a market value equal to its book value. Currently, the firm has excess cash of $500 and other assets of $9,500. Equity is worth $10,000. The firm has 250 shares of stock outstanding and net income of $1,400. What will the stock price per share be if the firm pays out its excess cash as a cash dividend?A. $36B. $38C. $40D. $42E. $44Price per share = ($10,000 - $500) ÷ 250 = $38Difficulty level: MediumTopic: CASH DIVIDENDType: PROBLEMS61. A firm has a market value equal to its book value. Currently, the firm has excess cash of $400 and other assets of $7,600. Equity is worth $8,000. The firm has 200 shares of stock outstanding and net income of $900. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after the dividend is paid?A. $0.25B. $0.45C. $2.50D. $3.80E. $4.50Earnings per share = $900 ÷ 200 = $4.50Difficulty level: MediumTopic: CASH DIVIDENDType: PROBLEMS62. Murphy's, Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account, $10,000 in the common stock account, and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the balance in the retained earnings account be after the dividend?A. $34,700B. $35,700C. $42,700D. $49,700E. $50,700Retained earnings = [(10,000 shares ⨯ .10) ⨯ $8 ⨯ -1] + $42,700 = $34,700Difficulty level: MediumTopic: SMALL STOCK DIVIDENDType: PROBLEMS63. Murphy's, Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per sh are. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account, $10,000 in the common stock account and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the market price per share be after the dividend?A. $7.20B. $7.27C. $7.33D. $8.00E. $8.80Market price per share = (10,000 shares ⨯ $8) ÷ (10,000 shares ⨯ 1.10) = $7.27; Note that the total market value of the firm does not change.Difficulty level: MediumTopic: SMALL STOCK DIVIDENDType: PROBLEMS。