31 Dec Suppose the exchange rate between

Question 1

2 out of 2 points

Which of the following is NOT normally regarded as being a barrier to hostile takeovers?

Question 2

2 out of 2 points

Which of the following is NOT normally regarded as being a good reason to establish an ESOP?

Question 3

2 out of 2 points

Which of the following statements is correct?

Question 4

2 out of 2 points

Consider two very different firms, M and N. Firm M is a mature firm in a mature industry. Its annual net income and net cash flows are both consistently high and stable. However, M’s growth prospects are quite limited, so its capital budget is small relative to its net income. Firm N is a relatively new firm in a new and growing industry. Its markets and products have not stabilized, so its annual operating income fluctuates considerably. However, N has substantial growth opportunities, and its capital budget is expected to be large relative to its net income for the foreseeable future. Which of the following statements is correct?

Question 5

2 out of 2 points

The projected capital budget of Kandell Corporation is $1,000,000, its target capital structure is 60% debt and 40% equity, and its forecasted net income is $550,000. If the company follows a residual dividend policy, what total dividends, if any, will it pay out?

Question 6

2 out of 2 points

Which of the following statements is correct?

Question 7

2 out of 2 points

Rohter Galeano Inc. is considering how to set its dividend policy. It has a capital budget of $3,000,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity. The company forecasts that its net income this year will be $3,500,000. If the company follows a residual dividend policy, what will be its total dividend payment?

Question 8

0 out of 2 points

Which of the following statements is correct?

Correct Stock repurchases make the most sense at times when a company believes its stock is undervalued.

Question 9

2 out of 2 points

In the real world, dividends

Question 10

2 out of 2 points

Which of the following statements is CORRECT?

Question 11

2 out of 2 points

Blueline Publishers is considering a recapitalization plan. It is currently 100% equity financed but under the plan it would issue long-term debt with a yield of 9% and use the proceeds to repurchase common stock. The recapitalization would not change the company’s total assets, nor would it affect the firm’s basic earning power, which is currently 15%. The CFO believes that this recapitalization would reduce the WACC and increase stock price. Which of the following would also be likely to occur if the company goes ahead with the recapitalization plan?

Question 12

2 out of 2 points

Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant?

Question 13

2 out of 2 points

Firms U and L both have a basic earning power ratio of 20% and each has the same amount of assets. Firm U is unleveraged, i.e., it is 100% equity financed, while Firm L is financed with 50% debt and 50% equity. Firm L’s debt has a before-tax cost of 8%. Both firms have positive net income. Which of the following statements is CORRECT?

Question 14

2 out of 2 points

Which of the following is NOT associated with (or does not contribute to) business risk? Recall that business risk is affected by a firm’s operations.

Question 15

0 out of 2 points

Which of the following statements is CORRECT?

Question 16

2 out of 2 points

Which of these items will not generally be affected by an increase in the debt ratio?

Question 17

0 out of 2 points

Which of the following statements is most consistent with efficient inventory management? The firm has a

Question 18

2 out of 2 points

Which of the following will cause an increase in net working capital, other things held constant?

Question 19

2 out of 2 points

Which of the following actions would be likely to shorten the cash conversion cycle?

Question 20

2 out of 2 points

A lockbox plan is most beneficial to firms that

Question 21

2 out of 2 points

Which of the following is NOT commonly regarded as being a credit policy variable?

Question 22

2 out of 2 points

Which of the following actions should Reece Windows take if it wants to reduce its cash conversion cycle?

Question 23

2 out of 2 points

A product sells for $750 in the United States. The exchange rate is $1 to 1.65 Swiss francs. If purchasing power parity (PPP) holds, what is the price of the product in Switzerland?

Question 24

2 out of 2 points

Suppose Yates Inc., a U.S. exporter, sold a consignment of antique American muscle-cars to a Japanese customer at a price of 143.5 million yen, when the exchange rate was 140 yen per dollar. In order to close the sale, Yates agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would Yates actually receive after it exchanged yen for U.S. dollars?

Question 25

2 out of 2 points

In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be selling for today in U.S. dollars?

Question 26

2 out of 2 points

In Japan, 90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return. In the United States, 90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%. All securities are of equal risk, and Japanese securities are denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets, which of the following statements is most CORRECT?

Question 27

2 out of 2 points

If the inflation rate in the United States is greater than the inflation rate in Britain, other things held constant, the British pound will

Question 28

2 out of 2 points

A box of chocolate candy costs 28.80 Swiss francs in Switzerland and $20 in the United States. Assuming that purchasing power parity (PPP) holds, what is the current exchange rate?

Question 29

2 out of 2 points

Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and the exchange rate between the U.S. dollar and the euro is $1.00 = 1.64 euros. What is the cross-rate of Swiss francs to euros?

Question 30

2 out of 2 points

If the spot rate of the Israeli shekel is 5.51 shekels per dollar and the 180-day forward rate is 5.97 shekels per dollar, then the forward rate for the Israeli shekel is selling at a ____ to the spot rate.