Problem 1: The ________ is utilized to value preferred stock.
a. Capital Asset Pricing Model (CAPM)
b. Constant Growth Model
c. Variable Growth Model
d. Zero Growth Model
e. Gordon Model
Problem 2: The factors involved in setting a dividend policy include all of the following except:
a. Operating Constraints
b. Legal Constraints
c. Contractual Constraints
d. Internal Constraints
e. Regulatory Constraints
Problem 3: Fluctuations in foreign exchange markets can affect foreign revenues and profits of a multinational company, but they have no impact on its overall value.
a. True
b. False
Problem 4: The three basic types of risks associated with internal cash flows are business and financial risks, inflation and foreign exchange risks, and political risks/
a. True
b. False
Problem 5: A local bank is offering a zero coupon certificate of deposit for $25,000. At maturity, three years from now, the investor will receive $32,000. What is the rate of return on this investment?
a. 3 percent
b. 6 percent
c. 9 percent
d. 12 percent
e. 15 percent
Problem 6: The present value of $200 to be received 10 years from today, assuming an opportunity cost of 10 percent is:
a. $50
b. $200
c. $518
d. $77
e. None of the above
Problem 7: In capital budgeting, the NPV will be zero when the discount rate used to evaluate the project is identical to the IRR.
a. True
b. False
Problem 8: Which of the following is not a component of a financial plan:
a. Capital expenditures
b. Working capital requirements
c. Price/Earnings on the stock
d. Sales and expense projections
e. Funding strategies
Problem 9: A financial plan could be used to project all but the following:
a. Profitability
b. Cash Flow
c. Market Competitiveness
d. Cost of Capital
e. Asset Utilization