Question 1. The difference between the market value of an investment and its cost is the:
- Net present value
- Internal rate of return
- Payback Period
- Profitability Index
Question 2. The process of valuing an investment by determining the net present value of its future cash flows is called (the):
- Constant dividend growth model
- Discount cash flow valuation
- Expected earnings model
- Capital Asset Pricing Model
Question 3. The length of time required for an investment to generate cash flow sufficient to recover its initial cost it the:
- Net present value
- Internal rate of return
- Payback period
- Profitability index
Question 4. The discount rate that makes the net present value of an investment exactly equal to zero is the:
- Payback period
- Internal rate of return
- Average accounting return
- Profitability index
Question 5. A situation in which taking one investment prevents the taking of another is called:
- Net present value profiling
- Operational ambiguity
- Mutually exclusive investment decisions
- Issues of scale
- Multiple rates of return
Question 6. The chnages in the firms future cash flows that are a direct consequence of accepting a project are called:
- Incremental cash flows
- Stand-alone cash flows
- Aftertax cash flows
- Net present value cash flows
- Erosion cash flows
Question 7. A cost that has alread been paid, or the liability to pay has already been incurred is a(n):
- Salvage value expense
- Net working capital expense
- Opportunity cost
- Sunk cost
- Erosion cost
Question 8. The most valuable investment given up if an alternative investment is chosen is a(n):
- Salvage value expense
- Net working capital expense
- Sunk cost
- Opportunity cost
- Erosion cost
Question 9. The possibility that errors in projected cash flows can lead to incorrect NPV estimates is called:
- Forecasting risk
- Projection risk
- Scenario risk
- Monte Carlo risk
- Accounting risk
Question 10. An analysis of what happens to NPV estimates when we ask what-if questions is called:
- Forecasing analysis
- Scenario analysis
- Sensitivity analysis
- Simualtion analysis
- Break-even analysis
Question 11. An analysis of the relation between sales volume and various measures of profitability is called:
- Forecasting analysis
- Scenario analysis
- Sensitivity analysis
- Simulation analysis
- Break-evem analysis
Question 12. The return that lender require on their loaned funds to the firm is called the:
- Coupon rate
- Current yield
- Cost of debt
- Capital gains yield
- Cos of capital
Question 13. The weighted averal of the firm's cost of equity, preferred stock, and after-tax debt is the:
- Reward to risk ratio for the firm
- Expected capital gains yield of the stock
- Expected capital gains yield for the firm
- Portfolio beta of the firm
- Weighted average cost of capital (WACC)
Question 14. The proportions of the market value of the firm's assets financed via debt, common stock, and preferred stock are called the firms ______________.
- Financing costs
- portfoliio weights
- Beta coefficient
- Capital structure weights
- Cost of capital
Question 15. The legal document describing details of the issuing corporation and its security offering to potential investors is called the _____________.
- Letter of comment
- Rights offering
- Offering prospectus
- Regulation A statement
- Tombstone advertisement
Question 16. A public offering of securities offered for sale to the general public on a direct cash basis is called a:
- Best efforts offer
- Firm commitment offer
- General cash offer
- Rights offer
- Red herring offer
Question 17. The use of personal borrowing to change the overall amount of finanical leverage to which the individual is exposed is called:
- Private debt placement
- Dividend recapture
- Homemade leverage
- A privileged subscription offer
- The weighted average cost of captial
Question 18. The equity risk derived from the firm's operating activities is called ________ risk.
- market
- systematic
- extrinsic
- business
- financial
Question 19. The proposition that the cost of equity is a positive linear function of capital structure is called :
- The Capital Asset Pricing Model
- M&M Proposition I
- M&M Propostion II
- The Law of One Price
- The Efficient Markets Hypothesis
Question 20. The equity risk derived form the firm's capital structure policy is called ___________ risk.
- market
- systematic
- extrinsic
- financial
- business
Question 21. Payments made out of the firm's earning to its owners in the form of cash or stock are called:
- Dividends
- Distributions
- Share repurchases
- Payment-in-kind
- Stock splits
Question 22. Payments made by a firm to its owners from sources other than current or accumulated earings is called:
- Dividends
- Distributions
- Share repurchases
- Payment-in-kind
- Stock splits
Question 23. A cash payment made by a firm to its owners as a result of a one-time event is called a:
- Share repurchase
- Liquidating dividends
- Regular cash dividend
- Special dividend
- Extra cash dividend
Question 24. 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 _________.
- date of ex-rights
- date of ex-dividend
- date of record
- date of payment
- date of declaration
Question 25. The date on which the board of directors passes a resolution authorizing payment of a dividend to the sharholders if the _________ date.
- ex-rights
- ex-dividend
- record
- payment
- declaration