Question 1
6..5 pts
The feature in a bond indenture that requires systematic retirement of the bond issue is a
planned call provision.
sinking fund provision.
forced conversion provision.
mandated redemption provision.
Question 2
6..5 pts
Operating leverage describes the relationship between...
EBIT and sales
taxes and sales
debt and equity
fixed costs and variable costs
Question 3
6..5 pts
The risk-free rate is 5% and the expected return on the market portfolio is 13%. A stock has a beta of 1.5,
what is its expected return?
17%
12%
19.5%
24.5%
Incorrect Question 4
.5 pts
Bavarian Brew, an unlevered firm, has an expected EBIT of $500,000. The required return on assets for
the firm’s assets is 10%. The company has 250,000 shares outstanding. The company is considering
, raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase
outstanding stock. What is the value of Bavarian Brew before restructuring? Assume no corporate taxes.
$500,000
$5,000,000
$1,000,000
$3,300,000
Question 5
6..5 pts
Net working capital decreases when
inventory falls, accounts receivable falls, or accounts payable increases
inventory increases, accounts receivable increases, or accounts payable falls
cost of goods sold falls, or interest rate falls
operating expenses fall, or current assets increase
Question 6
6..5 pts
The uncertainty caused by the variability of a firm’s cash flows is called . . .
financial risk
business risk
financial leverage
none of the above
Question 7
6..5 pts
A bond sold by foreign corporations to U.S. investors is called a(n
Eurobond
foreign bond
Yankee bond
6..5 pts
The feature in a bond indenture that requires systematic retirement of the bond issue is a
planned call provision.
sinking fund provision.
forced conversion provision.
mandated redemption provision.
Question 2
6..5 pts
Operating leverage describes the relationship between...
EBIT and sales
taxes and sales
debt and equity
fixed costs and variable costs
Question 3
6..5 pts
The risk-free rate is 5% and the expected return on the market portfolio is 13%. A stock has a beta of 1.5,
what is its expected return?
17%
12%
19.5%
24.5%
Incorrect Question 4
.5 pts
Bavarian Brew, an unlevered firm, has an expected EBIT of $500,000. The required return on assets for
the firm’s assets is 10%. The company has 250,000 shares outstanding. The company is considering
, raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase
outstanding stock. What is the value of Bavarian Brew before restructuring? Assume no corporate taxes.
$500,000
$5,000,000
$1,000,000
$3,300,000
Question 5
6..5 pts
Net working capital decreases when
inventory falls, accounts receivable falls, or accounts payable increases
inventory increases, accounts receivable increases, or accounts payable falls
cost of goods sold falls, or interest rate falls
operating expenses fall, or current assets increase
Question 6
6..5 pts
The uncertainty caused by the variability of a firm’s cash flows is called . . .
financial risk
business risk
financial leverage
none of the above
Question 7
6..5 pts
A bond sold by foreign corporations to U.S. investors is called a(n
Eurobond
foreign bond
Yankee bond
