单选题 An analyst has gathered the following data about a company with a 12 percent cost of capital.

	Project A	Project B
Initial cost	$15000	$20000
Life	5years	4years
Cash inflows	$5000/year	$7500/year

单选题 If the projects are independent, the company should:

A. accept both projects. B. accept project A and reject project B.
C. reject project A and accept project
B.

【正确答案】 A

【答案解析】Independent projects accept all with + NPV or IRR ＞ cost of capital, NPV_A) = 3024 ( NPV computation is easy-treat cash flows as an annuity→N = 5; I=12 ; PMT = 5000 ; FV = 0 ; CPT PV =18024→NPV = 18024 - 15000 =3024), NPV_B = 2780 (NPV-treat cash flows as an annuity, N = 4 ; I = 12 ; PMT = 7500 ; FV = 0 ; CPT PV = 22780→NPV = 22780 - 20000 = 2780).

单选题 If the projects are mutually exclusive, the company should:

A. accept both projects. B. accept A and reject B.
C. reject A and accept
B.

单选题 Which of the following might be an undesirable trait of a member of the board of directors?

A. Experience with the technologies, products, and services the firm offers.
B. Positive public statements regarding an individual's ethical viewpoints.
C. Service on the board for more than 10 years.

【正确答案】 C

【答案解析】Service on the board for more than 10 years may indicate knowledge and experience, but may result in a member becoming too close to management.

单选题 In order to more accurately estimate the cost of equity for a company situated in a developing market, an analyst should:

A. add a country risk premium to the market risk premium when using the capital asset pricing model (CAPM).
B. add a country risk premium to the risk-free rate when using the capital asset pricing model.
C. use the yield on the sovereign debt of the developing country instead of the market risk premium when using the capital asset pricing model.

【正确答案】 A

【答案解析】In order to reflect the increased risk when investing in a developing country, a country risk premium is added to the market risk premium when using the CAPM.

单选题 Which of the following firms is most likely to have a board of directors that considers the best interest of all shareholders?

A. Firms that assign a single vote to each share, but not firms with different classes of common equity with supermajority rights given to one class.
B. Firms that assign a single vote to each share, and firms with different classes of common equity with supermajority rights given to one class.
C. Firms with different classes of common equity with supermajority rights given to one class, but not firms that assign a single vote to each share.

【正确答案】 A

【答案解析】Firms that assign one vote to each share are more likely to have a board that considers the best interest of all shareholders. Firms with dual classes of common equity where supermajority rights are given to one class are likely to have boards that focus on the interests of the supermajority shareholders.

单选题 A firm is reviewing an investment opportunity that requires an initial cash outlay of $336, 875 and promises to return the following irregular payments:
Year 1 : $100000
Year 2 : $82000
Year 3 : $76000
Year 4 : $111000
Year 5 : $142000
If the required rate of return for the firm is 8 percent, what is the net present value of the investment?

A. $86133.
B. $99860.
C. $64582.

【正确答案】 C

【答案解析】In order to determine the net present value of the investment, given the required rate of return, we can discount each cash flow to its present value, sum the present value, and subtract the required investment.

Year	Cash Flow	PV of Cash flow at 8%
0	-336875.00	-336875.00
1	100000.00	92592.59
2	82000.00	70301.78
3	76000.00	60331.25
4	111000.00	81588.31
5	142000. O0	96642.81
Net Present Value		64581.74

单选题 A firm has $4 million in outstanding bonds that mature in four years, with a fixed rate of 7.5% (assume annual payments). The bonds trade at a price of $98 in the open market. The firm's marginal tax rate is 35 %. Using the bond-yield plus method, what is the firm's cost of equity risk assuming an add-on of 4%?

A. 13.34%.
B. 11.50%.
C. 12.11%.

【正确答案】 C

【答案解析】If the bonds are trading at $98, the required yield is 8.11% , and the market value of the issue is $3.92 million. To calculate this rate using a financial calculator ( and figuring the rate assuming a $100 face value for each bond), N=4, PMT=7.5 =(0.075 ×100), FV=100, PV = -98, CPT I/Y = 8.11. By adding the equity risk factor of 4% , we compute the cost of equity as 12.11%.

单选题 Which item is least likely assumed to be a constant percentage of sales on a pro forma balance sheet?

A. Inventory.
B. Long-term debt.
C. Accounts payable.

【正确答案】 B

【答案解析】The projected level of long-term debt will depend on the financing need or surplus that results from the net income projection and the assumptions about how the surplus will be used or the need will be financed. Current assets, long-term assets, and current liabilities are all more likely to grow proportionately with sales.

单选题 The most accurate way to account for flotation costs when issuing new equity to finance a project is to :

A. increase the cost of equity capital by dividing it by ( 1 - flotation cost).
B. adjust cash flows in the computation of the project NPV by the dollar amount of the flotation costs.
C. increase the cost of equity capital by multiplying it by ( 1 + flotation cost).

【正确答案】 B

【答案解析】Adjusting the cost of equity for flotation costs is incorrect because doing so entails adjusting the present value of cash flows by a fixed percentage over the life of the project. In reality, flotation costs are a cash outflow that occurs at the initiation of a project. Therefore, the correct way to account for flotation costs is to adjust the cash flows in the computation of project NPV, not the cost of equity. The dollar amount of the flotation cost should be considered an additional cash outflow at initiation of the project.

单选题 A properly qualified board member is of vital importance to proper corporate governance within a firm. Board members who lack the requisite skills, knowledge and expertise to conduct a thorough review of the firm's activities are:

A. more likely to consult with outside interests to assist in decision-making.
B. more likely to be "unpaid" board members.
C. more likely to defer to management when making decisions.

【正确答案】 C

【答案解析】Board members must be properly qualified, having the knowledge and experience which is required to advise management in light of the firm's specific situations encountered. The other answers are incorrect.

单选题 A company is considering a $10000 project that will last 5 years.
Annual after tax cash flows are expected to be $3000
Target debt/equity ratio is 0.4
Cost of equity is 12%
Cost of debt is 6%
Tax rate 34%
What is the project's net present value (NPV) ?

A. + $1460.
B. + $1245
C.$0.

【正确答案】 A

【答案解析】First, calculate the weights for debt and equity
w_d+w_e=1
w_e=1-w_d
w_d/w_e=0.40
w_d=0.40×(1-w_d)
w_d=0.40-0.40w_d
1.40w_d=0.40
w_d=0.286, w_e=0.714
Second, calculate WACC
WACC=(w_e×k_d)×(1-t)+(w_e×k_e)=(0.286×0.06×0.66)+(0.714×0.12)= 0.0113+0.0857=0.0970
Third, calculate the PV of the project cash flows
N=5, PMT=-3000, FV=0, I/Y=9.7, CPT PV=11460
And finally, calculate the project NPV by subtracting out the initial cash flow NPV=11460-$10000= $1460

单选题 Which of the following statements concerning Board committees is FALSE?

A. The audit committee has authority over the procedures used to audit the entire corporate group including subsidiaries and affiliates.
B. The compensation committee should consist of independent members and link executive compensation to long-term performance.
C. Members of the audit committee should be independent experts in accounting and finance.

【正确答案】 A

【答案解析】The independent auditor has authority over the audit procedures. The audit committee is responsible for hiring and supervising the independent auditor.

单选题 If a company has a net profit margin of 15 percent, an asset turnover ratio of 4.5 and a ROE of 18 percent, what is the equity multiplier?

A. 0.523.
B. 0.267.
C. 2.667.

【正确答案】 B

【答案解析】There are many different ways to illustrate ROE one of which is : ROE = ( net profit margin) ( asset turnover) ( equity multiplier) 0.18 = (0.15) (4.5) (equity multiplier) 0.18/[ (0.15) (4.5) ] = equity multiplier 0.18/0.675 = equity multiplier 0.18/0.675 = 0.267

单选题 Corporate governance is the set of internal controls, processes and procedures defining how a firm is managed. Which of the following statements concerning corporate governance is FALSE?

A. Corporate governance defines the appropriate rights, roles and responsibilities of management, the board, and stakeholders within a firm.
B. Good corporate governance means that the board can work effectively with management.
C. Good corporate governance practices seek to ensure that the board protects shareholder interests.

【正确答案】 B

【答案解析】The board of directors must be able to act independently from management. The other statements concerning corporate governance are true.