Risks associated with internal cash flows


Problem  1: The ________ is utilized to value preferred stock.

a.    Capital Asset Pricing Model (CAPM)
b.    Constant Growth Model
c.    Variable Growth Model
d.    Zero Growth Model
e.    Gordon Model

Problem  2: The factors involved in setting a dividend policy include all of the following except:

a.    Operating Constraints
b.    Legal Constraints
c.    Contractual Constraints
d.    Internal Constraints
e.    Regulatory Constraints

Problem  3: Fluctuations in foreign exchange markets can affect foreign revenues and profits of a multinational company, but they have no impact on its overall value.

a.    True
b.    False

Problem  4: The three basic types of risks associated with internal cash flows are business and financial risks, inflation and foreign exchange risks, and political risks/

a.    True
b.    False

Problem  5: A local bank is offering a zero coupon certificate of deposit for $25,000. At maturity, three years from now, the investor will receive $32,000. What is the rate of return on this investment?

a.    3 percent
b.    6 percent
c.    9 percent
d.    12 percent
e.    15 percent

Problem  6: The present value of $200 to be received 10 years from today, assuming an opportunity cost of 10 percent is:

a.    $50
b.    $200
c.    $518
d.    $77
e.    None of the above

Problem  7: In capital budgeting, the NPV will be zero when the discount rate used to evaluate the project is identical to the IRR.

a.    True
b.    False

Problem  8: Which of the following is not a component of a financial plan:

a.    Capital expenditures
b.    Working capital requirements
c.    Price/Earnings on the stock
d.    Sales and expense projections
e.    Funding strategies

Problem  9: A financial plan could be used to project all but the following:

a.    Profitability
b.    Cash Flow
c.    Market Competitiveness
d.    Cost of Capital
e.    Asset Utilization

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Finance Basics: Risks associated with internal cash flows
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