BUSI 311 FINAL QUESTIONS AND ANSWERS EXAM LATEST
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A major weakness of a partnership is..
the difficulty in liquidating or transferring ownership
Under which of the following legal forms of organization is ownership readily
transferable?
Corporation
Which of the following forms of organizations is the easiest to form?
sole proprietorship
Which of the following is true of a partnership and a corporation?
In a partnership incomes is taxed at the corporate level, where as in a corporation,
income is taxed twice.
Wealth maximization is the goal of a firm implies enhancing the wealth of
the firms stockholders
The key variables in the owner wealth maximization process are ________.
cash flows and risk
The primary economic principle used in managerial finance is
marginal cost- benefit analysis
Which of the following is the best measure to ensure that management decisions
are in the best interest of the stockholders?
the management compensation to the level of dividend per share
The conflict between the goals of a firm's owners and the goals of its non- owner
managers is
The agency problem
The agency problem may result from a manager's concerns about
Maximizing shareholder value
An ethics problem is expected to have ___________ Impact on a firms share price
Positive
Which of the following is considered as a violation of business ethics
Earnings management
Which of the following is one of the positive benefits of an effective ethics
program?
Reduce potential litigation and judgement costs
The implementation of a pro-active ethics program is expected to result in
A positive corporate image and increased respect, but is not expected to affect share
price
An effective ethics program
Can enhance a corporation's value
Corporate ethics policies typically apply to ___ in dealing with
Employee actions, all corporate constituents
Because equityholders are the last to receive any distribution of assets as a
result of bankruptcy proceedings, they expect ________.
, Greater returns from their investment in the firm's stock
If expected return is less than required return on an asset, rational investors will
Sell the asset, which will drive the price down and cause the expected return to reach
the level of required return
A firm has an issue of preferred stock outstanding that has a stated annual
dividend of $4. The required return on the preferred stock has been estimated to
be 16 percent. The value of the preferred stock is ________.
$25
Emmy Lou, Inc. has an expected dividend next year of $5.60 per share, a growth
rate of dividends of 10 percent, and a required return of 20 percent. The value of a
share of Emmy Lou, Inc.'s common stock is ________.
$56.00
Tangshan China Company's stock is currently selling for $80.00 per share. The
expected dividend one year from now is $4.00 and the required return is 13
percent. What is Tangshan's dividend growth rate assuming that dividends are
expected to grow at a constant rate forever?
8%
Daniel Custom Cycles' common stock currently pays no dividends. The company
plans to begin paying dividends beginning 3 years from today. The first dividend
will be $3.00 and dividends will grow at 5 percent per year thereafter. Given a
required return of 15 percent, what would you pay for the stock today?
$22.68
Jia's Fashions recently paid a $2 annual dividend. The company is projecting that
its dividends will grow by 20 percent next year, 12 percent annually for the two
years after that, and then at 6 percent annually thereafter. Based on this
information, how much should jia's Fashions common stock sell for today if her
required return is 10.5%?
$66.60
Smith Corporation's common stock is expected to pay a dividend of $3.00 forever
and currently sells for $21.42. What is the required rate of return?
13%
In the Gordon model, the value of the common stock is the
Present value of a constant growing dividend stream
Patrick Company expects to generate free-cash of $120,000 per year forever. If
the firm's required return is 12 percent, the market value of debt is $300,000, the
market value of preferred stock is $70,000, and the company has 100,000 shares
of stock outstanding. What is the value of Patrick's stock?
$6.30
The current price of DEF Corporation stock is $26.50 per share. Earnings next
year should be $2 per share and it should pay a $1 dividend. The P/E multiple is
15 times on average. What price would you expect for DEF's stock in the future?
$30.00
At year end, Tangshan China Company balance sheet showed total assets of $60
million, total liabilities (including preferred stock) of $45 million, and 1,000,000
shares of common stock outstanding. Next year, Tangshan is projecting that it
UPDATE.Buy Quality Materials!
A major weakness of a partnership is..
the difficulty in liquidating or transferring ownership
Under which of the following legal forms of organization is ownership readily
transferable?
Corporation
Which of the following forms of organizations is the easiest to form?
sole proprietorship
Which of the following is true of a partnership and a corporation?
In a partnership incomes is taxed at the corporate level, where as in a corporation,
income is taxed twice.
Wealth maximization is the goal of a firm implies enhancing the wealth of
the firms stockholders
The key variables in the owner wealth maximization process are ________.
cash flows and risk
The primary economic principle used in managerial finance is
marginal cost- benefit analysis
Which of the following is the best measure to ensure that management decisions
are in the best interest of the stockholders?
the management compensation to the level of dividend per share
The conflict between the goals of a firm's owners and the goals of its non- owner
managers is
The agency problem
The agency problem may result from a manager's concerns about
Maximizing shareholder value
An ethics problem is expected to have ___________ Impact on a firms share price
Positive
Which of the following is considered as a violation of business ethics
Earnings management
Which of the following is one of the positive benefits of an effective ethics
program?
Reduce potential litigation and judgement costs
The implementation of a pro-active ethics program is expected to result in
A positive corporate image and increased respect, but is not expected to affect share
price
An effective ethics program
Can enhance a corporation's value
Corporate ethics policies typically apply to ___ in dealing with
Employee actions, all corporate constituents
Because equityholders are the last to receive any distribution of assets as a
result of bankruptcy proceedings, they expect ________.
, Greater returns from their investment in the firm's stock
If expected return is less than required return on an asset, rational investors will
Sell the asset, which will drive the price down and cause the expected return to reach
the level of required return
A firm has an issue of preferred stock outstanding that has a stated annual
dividend of $4. The required return on the preferred stock has been estimated to
be 16 percent. The value of the preferred stock is ________.
$25
Emmy Lou, Inc. has an expected dividend next year of $5.60 per share, a growth
rate of dividends of 10 percent, and a required return of 20 percent. The value of a
share of Emmy Lou, Inc.'s common stock is ________.
$56.00
Tangshan China Company's stock is currently selling for $80.00 per share. The
expected dividend one year from now is $4.00 and the required return is 13
percent. What is Tangshan's dividend growth rate assuming that dividends are
expected to grow at a constant rate forever?
8%
Daniel Custom Cycles' common stock currently pays no dividends. The company
plans to begin paying dividends beginning 3 years from today. The first dividend
will be $3.00 and dividends will grow at 5 percent per year thereafter. Given a
required return of 15 percent, what would you pay for the stock today?
$22.68
Jia's Fashions recently paid a $2 annual dividend. The company is projecting that
its dividends will grow by 20 percent next year, 12 percent annually for the two
years after that, and then at 6 percent annually thereafter. Based on this
information, how much should jia's Fashions common stock sell for today if her
required return is 10.5%?
$66.60
Smith Corporation's common stock is expected to pay a dividend of $3.00 forever
and currently sells for $21.42. What is the required rate of return?
13%
In the Gordon model, the value of the common stock is the
Present value of a constant growing dividend stream
Patrick Company expects to generate free-cash of $120,000 per year forever. If
the firm's required return is 12 percent, the market value of debt is $300,000, the
market value of preferred stock is $70,000, and the company has 100,000 shares
of stock outstanding. What is the value of Patrick's stock?
$6.30
The current price of DEF Corporation stock is $26.50 per share. Earnings next
year should be $2 per share and it should pay a $1 dividend. The P/E multiple is
15 times on average. What price would you expect for DEF's stock in the future?
$30.00
At year end, Tangshan China Company balance sheet showed total assets of $60
million, total liabilities (including preferred stock) of $45 million, and 1,000,000
shares of common stock outstanding. Next year, Tangshan is projecting that it
