FINC600 Week 1 Practice Quiz

FINC600 Week 1 Practice Quiz 

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Corporate Finance

 Week 1 Practice Quiz

Question 1 of 15

As a legal entity a corporation can perform the following functions except: I) borrow money; II) lend money; III) sue and be sued; IV) vote

   A.I and II only 

   B.I, II, and III only 

   C.IV only 

   D.I, II, III and IV 

Question 2 of 15

A firm's investment decision is also called the:

   A. Financing decision 

   B. Liquidity decision 

   C. Capital budgeting decision 

   D. None of the above 

Question 3 of 15

The following are important functions of financial markets: I) Source of financing; II) Provide liquidity; III) Reduce risk; IV) Source of information

   A.I only 

   B.I and II only 

   C.I, II, III, and IV 

   D.IV only 

Question 4 of 15

The mixture of debt and equity, used to finance a corporation is also known as:

   A. Capital budgeting 

   B. Capital structure 

   C. Investing 

   D. Treasury 

Question 5 of 15

The following are some of the actions shareholders can take if the corporation is not performing well:

   A. Replace the board of directors in an election. 

   B. Force the board of directors to change the management team. 

   C. Sell their shares of stock in the corporation. 

   D. Any of the above 

Question 6 of 15

Major disadvantages of the Sarbanes-Oxley Act of 2002 (SOX) are the following except:

   A. good investor protection 

   B. increase in compliance costs 

   C. that it constrains managers' ability to run the firm 

   D. that it may discourage development of human capital in the firm 

Question 7 of 15

Present Value is defined as:

   A. Future cash flows discounted to the present at an appropriate discount rate 

   B. Inverse of future cash flows 

   C. Present cash flow compounded into the future 

Question 8 of 15

Present Value of $100,000 that is, expected, to be received at the end of one year at a discount rate of 25% per year is:

·         $80,000 

   B. $125,000 

   C. $100,000 

   D. None of the above 

 Feedback: PV = (100,000)/(1 + 0.25) = 80,000

Question 9 of 15

If the present value of a cash flow generated by an initial investment of $200,000 is $250,000, what is the NPV of the project?

·         $250,000 

   B. $50,000 

   C. $200,000 

   D. None of the above 

 Feedback: NPV = -200,000 + 250,000 = 50,000

Question 10 of 15

According to the net present value rule, an investment in a project should be made if the:

   A.Net present value is greater than the cost of investment 

   B.Net present value is greater than the present value of cash flows 

   C.Net present value is positive 

   D.Net present value is negative 

Question 11 of 15

An annuity is defined as

   A. Equal cash flows at equal intervals of time for a specified period of time 

   B. Equal cash flows at equal intervals of time forever