Sophia
Principles of Finance
Milestone Final
1
Mason is a financial analyst who specializes in securities. When providing an analysis of
securities to which he has a personal connection, he discloses his conflict of interest.
By doing so, which federal regulation is he complying with?
Securities Act Amendments of 1975
Securities Act of 1933
Sarbanes-Oxley Act of 2002
Securities Exchange Act of 1934
CONCEPT
Market Regulation
2
You deposit $7,000 in a bank account that earns 2% compound interest annually.
What is the value of your $7,000 in four years?
,$6,423
$7,577
$7,560
$6,440
CONCEPT
Future Value, Single Cash Flows
3
Company A Company B
Market Value of Equity $700,000 $900,000
Market Value of Debt $300,000 $200,000
Cost of Equity 8% 10%
Cost of Debt 1.5% 3%
Tax Rate 30% 25%
Based solely on their current weighted average cost of capital, which company should pursue an
investment opportunity with an expected return of 7%?
Both Company A and Company B
, Neither Company A nor Company B
Only Company B
Only Company A
CONCEPT
The WACC
4
What must be forecasted first in order to prepare the pro forma income statement?
Cost of goods sold
Sales
Net income
Expenses
CONCEPT
Principles of Finance
Milestone Final
1
Mason is a financial analyst who specializes in securities. When providing an analysis of
securities to which he has a personal connection, he discloses his conflict of interest.
By doing so, which federal regulation is he complying with?
Securities Act Amendments of 1975
Securities Act of 1933
Sarbanes-Oxley Act of 2002
Securities Exchange Act of 1934
CONCEPT
Market Regulation
2
You deposit $7,000 in a bank account that earns 2% compound interest annually.
What is the value of your $7,000 in four years?
,$6,423
$7,577
$7,560
$6,440
CONCEPT
Future Value, Single Cash Flows
3
Company A Company B
Market Value of Equity $700,000 $900,000
Market Value of Debt $300,000 $200,000
Cost of Equity 8% 10%
Cost of Debt 1.5% 3%
Tax Rate 30% 25%
Based solely on their current weighted average cost of capital, which company should pursue an
investment opportunity with an expected return of 7%?
Both Company A and Company B
, Neither Company A nor Company B
Only Company B
Only Company A
CONCEPT
The WACC
4
What must be forecasted first in order to prepare the pro forma income statement?
Cost of goods sold
Sales
Net income
Expenses
CONCEPT
