中山大学财务管理期末试卷(英语)2

FINANCIAL MANAGEMENT EXAMINATION(2)
Time: 2 Hours Marks:
A. Define and briefly explain each of the following terms (10 points)
1. Free Cash Flow
2. Market Risk
3. Internal Rate of Raturn
4. CAPM
5. BreakevenAnalysis
B. Multiple Choice Questions(40 points)
1.Businesses can be organized as
A) sole proprietorships
B) partnerships
C) corporations
D) any of the above
2.Limited liability is an important feature of:
A) Sole proprietorships
B) Partnerships
C) Corporations
D) All of the above
3.In finance, "shortterm"means
A) less than three months
B) less than six months
C) less than one year
D) less than five years
4.Conflicts of interest between shareholders and managers of a firm result in:
A) Principalagentproblem
B) Increased agency costs
C) Both A and B
D) None of the above
5.The financial goal of a corporation is to:
A) Maximize sales
B) Maximize profits
C) Maximize the value of the firm for the shareholders
D) Maximize managers' benefits
6.If the present value of $480 expected to be received one year from today is $400,what is the discount rate?
A) 10%
B) 20%
C) 30%
D) None of the above
7.If the present value of a cash flow generated by an initial investment of $100,000 is$120,000, what is the NPV of the project?
A) $120,000
B) $20,000
C) $100,000
D) None of the above
8.There are two reasons for discounting future cash flow. They are:
A) A dollar today is worth more than a dollar tomorrow (for positive interestrates)
B) A safe dollar is worth more than a risky one
C) The value of a dollar is changing all the time
D) A and B above
9.The financial goal of a corporation is to:
A) Minimize stockholder wealth
B) Maximize profit
C) Maximize value of the corporation to the stockholders
D) None of the above
10.The variance or standard deviation is a measure of:
A) Total risk
B) Unique risk
C) Market risk
D) None of the above
11.If the present value of the cash flow X is $200, and the present value cash flow Y$150, than the present value of the combined cash flow is:
A) $200
B) $150
C) $50
D) $350
12.What is the present value of $10,000 per year perpetuity at an interest rate of 5%?
A) $10,000
B) $100,000
C) $200,000
D) None of the above
13.An annuity is defined as
A) Equal cash flows at equal intervals of time forever
B) Equal cash flows at equal intervals of time for a specificperiod
C) Unequal cash flows at equal intervals of time forever
D) None of the above
14. If the present annuity factor is 3.89, what is the present value annuity factor for anequivalent annuity due if the interest rate is 9%?
A) 3.57
B) 4.24
C) 3.89
D) None of the above.
15.The value of a common stock today depends on:
A) Number of shares outstanding and the number ofshareholders
B) The Wall Street analysts
C) The expected future dividends and the discount rate
D) Present value of the future earnings per share
16. Super Computer Company's stock is selling for $100 per share today. It isexpected that this stock will pay a dividend of 5 dollars per share, and then besold for $120 per share at the end of one year. Calculate the expected rate ofreturn for the shareholders.
A) 20%
B) 25%
C) 10%
D) 15%
17.Mcom Co. is expected to pay a dividend of $4 per share at the end of year one andthe dividends are expected to grow at a constant rate of 4% forever. If thecurrent price of the stock is $25 per share calculated the required rate of returnor the market capitalization rate for the firms' stock.
A) 4%
B) 16%
C) 20%
D) None of the above.
18.Which of the following investment rules does not use the time value of the moneyconcept?
A) The payback period
B) Internal rate of return
C) Net present value
D) All of the above use the time value concept
19.The net present value of a project depends upon:
A) forecasted cash flows and opportunity cost of capital
B) manager's tastes and preferences
C) company's choice of accounting method
D) all of the above
20.The main advantage of the payback rule is:
A) Adjustment for uncertainty of early cash flows
B) It is simple to use
C) Does not discount cash flows
D) Both A and C
C. True/False Questions(20 points)
T F 1.One distinctive feature of a corporation is that there is no separation ofownership and control.
T F 2.In a sole proprietorship, the owner is also the manager, and hence, agencycosts are at a minimum.
T F 3.The discount rate, hurdle rate or opportunity cost of capital all mean thesame.
T F 4.The rate of return on a perpetuity is equal to the cash flow divided by theprice.
T F 5.The relationship between nominal interest rate and real interest rate is givenby:1 + rnominal = (1 + rreal)(1+inflation rate)
T F pound interest assumes that you are reinvesting the interest payments atthe rate of return.
T F 7.At each point in time, all securities in an equivalentriskclass are priced tooffer the same expected return.
T F 8.The payback rule gives equal weight to all cash flows before the paybackdate and zero weight to subsequent cash flows.
T F 9.The IRR rule states that firms should accept any project offering an internalrate of return in excess of the cost of capital.
T F 10.Do not forget to include interest and dividend payments when calculating theproject's cash flow.
T F 11.Depreciation acts as a tax shield in reducing the taxes.
T F 12.Risk premium is the difference between the security return and the Treasurybill return.
T F 13.Diversification reduces risk because prices of different securities do notmove exactly together.
T F 14.Beta of a welldiversifiedportfolio is equal to the value weighted averagebeta of the securities included in the portfolio.
T F 15.Investors are mainly concerned with those risks that can be eliminatedthrough diversification.
T F 16.The company cost of capital is the correct discount rate for any projectundertaken by the company.
T F 17.Risky projects can be evaluated by discounting certainty
equivalent cashflows at the riskfreeinterest rate.
T F 18.Risky projects can be evaluated by discounting the expected cash flows at ariskadjusteddiscount rate.
T F 19.Firms that break even on an accounting basis are really losing theopportunity cost of capital on their investments.
T F 20.Projects with high fixed costs have higher breakeven
points.
D. Answer the following questions (30 points)
1. Respond to the following comment: “It's all very well telling companies tomaximize net present value, but ‘net present value’is just an abstract notion. What Itell my managers is that profits are what matters and It's profits that we're going tomaximize.”
2. What is the net present value rule? What is the rate of return rule? Do the tworules give the same answer?
3. “Diversification reduces risk. Therefore corporations ought to favor capitalinvestments with low correlations with their existing lines of business.”True or false?Why?
4. A common stock will pay a cash dividend of $4 next year. After that, thedividends are expected to increase indefinitely at 4 percent per year. If the discountrate is 14 percent, what is the PV of the stream of
dividend payment?
5. A portfolio contains equal investments in 10 stocks. Four have a beta of 1.0;threehave a beta of 1.2;the remainder has a beta of 1.4. What is the portfolio beta?
6. Fama and French have proposed a threefactormodel for expected returns. Whatare the three factors? 我始终相信，时光会证明每天不管多晚多累都坚持在自己脸上涂抹半小时是正确的！。