BUSI 530 QUIZ 2 / BUSI530 QUIZ 2:LATEST-LIBERTY UNIVERSITY

BUSI 530 QUIZ 2 / BUSI530 QUIZ 2:LATEST-LIBERTY UNIVERSITY BUSI 530 QUIZ 2 Question 1 2 out of 2 points With respect to the notion that stock prices follow a random walk, several researchers have concluded that: Answer • Question 2 2 out of 2 points A fundamental analyst: Answer • Question 3 2 out of 2 points If The Wall Street Journal lists a stock's dividend as $1, then it is most likely the case that the stock: Answer • Question 4 2 out of 2 points Which group of investors is capable of earning consistent, superior profits if financial markets are strong-form efficient? Answer • Question 5 2 out of 2 points A company reports significantly higher earnings on a Monday. You purchase the stock on Tuesday and earn superior returns in the absence of other new information. The market appears to be: Answer • Question 6 2 out of 2 points In a valuation of a non-constant dividend growth stock, the terminal value represents the: Answer • Question 7 2 out of 2 points The required return on an equity security is comprised of a: Answer • Question 8 2 out of 2 points Security prices are said to follow a "random walk," which means that: Answer • Question 9 2 out of 2 points If investors can consistently profit from thorough reading of published financial information, then the market can, at best, be characterized as: Answer • Question 10 2 out of 2 points What proportion of earnings is being plowed back into the firm if the sustainable growth rate is 8% and the firm's ROE is 20%? Answer • Question 11 2 out of 2 points What is the approximate IRR for a project that costs $100,000 and provides cash inflows of $30,000 for 6 years? Answer • Question 12 2 out of 2 points What is the decision rule in the case of sign changes that produce multiple IRRs for a project? Answer • Question 13 2 out of 2 points Which of the following should be assumed about a project that requires a $100,000 investment at time-period zero, then returns $20,000 annually for five years? Answer • Question 14 2 out of 2 points If a project's expected rate of return exceeds its opportunity cost of capital, one would expect: Answer • Question 15 2 out of 2 points The NPV of an investment made today is $10,000. If postponed for one year, the NPV at that time will increase by $1,000. Which of the following is correct if the opportunity cost of the investment is 12%? Answer • Question 16 2 out of 2 points What is the equivalent annual cost for a project that requires a $40,000 investment at time-period zero, and a $10,000 annual expense during each of the next 4 years, if the opportunity cost of capital is 10%? Answer • Question 17 2 out of 2 points The use of a profitability index will always provide results consistent with selecting the project with the: Answer • Question 18 2 out of 2 points Which of the following investment criteria takes the time value of money into consideration? Answer • Question 19 2 out of 2 points What is the NPV for the following project cash flows at a discount rate of 15%? CF0 = ($1,000), CF1 = $700, CF2 = $700. Answer • Question 20 2 out of 2 points In order for a manager to correctly decide to postpone an investment until one year into the future, the NPV of the investment should: Answer • Question 21 2 out of 2 points Opportunity costs for organizational resources: Answer • Question 22 2 out of 2 points A new project requires an increase in both current assets and current liabilities of $125,000 each. What is the overall impact on net working capital investment? Answer • Question 23 2 out of 2 points Why is it fairly easy to fall into the trap of discounting real cash flows with nominal rates? Answer • Question 24 2 out of 2 points Which of the following typically results from using straight-line depreciation in the set of books for shareholders? Answer • Question 25 2 out of 2 points In what manner does depreciation expense affect investment projects? Answer • Question 26 2 out of 2 points Which of the following statements regarding calculating cash flow from operations is incorrect? Answer • Question 27 2 out of 2 points If the adoption of a new product will reduce the sales of an existing product, then the: Answer • Question 28 2 out of 2 points Assume your firm has an unused machine that originally cost $75,000, has a book value of $20,000, and is currently worth $25,000. Ignoring taxes, the correct opportunity cost for this machine in capital budgeting decisions is: Answer • Question 29 2 out of 2 points The NPV of an investment proposal becomes negative as a result of allocating a portion of the corporation president's salary. It is most likely the case that: Answer • Question 30 2 out of 2 points Working capital will affect incremental cash flows if: Answer • Question 31 2 out of 2 points When market interest rates exceed a bond's coupon rate, the bond will: Answer • Question 32 2 out of 2 points Which of the following statements is correct for a 10% coupon bond that has a current yield of 7%? Answer • Question 33 2 out of 2 points The purpose of a floating-rate bond is to: Answer • Question 34 2 out of 2 points An investor buys a five-year, 9% coupon bond for $975, holds it for one year and then sells the bond for $985. What was the investor's rate of return? Answer • Question 35 2 out of 2 points How much should you pay for a $1,000 bond with 10% coupon, annual payments, and five years to maturity if the interest rate is 12%? Answer • Question 36 2 out of 2 points What happens when a bond's expected cash flows are discounted at a rate lower than the bond's coupon rate? Answer • Question 37 2 out of 2 points When an investor purchases a $1,000 par value bond that was quoted at 97.16, the investor: Answer • Question 38 2 out of 2 points Which of the following would not be associated with a zero-coupon bond? Answer • Question 39 2 out of 2 points Which of the following identifies the distinction between a U.S. Treasury bond and a Treasury note? Answer • Question 40 2 out of 2 points A bond's yield to maturity takes into consideration: Answer • Question 41 2 out of 2 points What level of management is responsible for originating capital budgeting proposals? Answer • Question 42 2 out of 2 points The accounting break-even point is that level of sales where: Answer • Question 43 2 out of 2 points If a 20% reduction in forecast sales would not extinguish a project's profitability, then sensitivity analysis would suggest: Answer • Question 44 2 out of 2 points Fixed costs: Answer • Question 45 2 out of 2 points The option for a firm to expand future production has value because: Answer • Question 46 2 out of 2 points What effect will a reduction in the cost of capital have on the accounting break-even level of revenues? Answer • Question 47 2 out of 2 points If a decision tree indicates an expected NPV of $1 million, then: Answer • Question 48 2 out of 2 points If forecasted sales exceed the break-even level but are less than the economic break-even level, the project has a: Answer • Question 49 2 out of 2 points The purpose of sensitivity analysis is to show: Answer • Question 50 2 out of 2 points A firm with high operating leverage is expected to: Answer