bfin final

What is considered a relevant cash flow for a project?

A change in the Firm's overall future cash flows that comes about as a direct consequence of a decision to take on that project

What are some common pitfalls when looking at incremental cash flows?

Including financing costs

Which of the following should a financial manager consider when considering an opportunity?

How much cash they expect to receive, When will they receive the funds, How likely they are to receive the funds

Which one is a financial leverage ratio?

Liabilities to equity

Which of the following ratios are considered market-based ratio

P/E ratio and P/BV ratio

Noncash items refer to

Expenses which do not directly affect net cash flows

Which of the following are current assets?
Cash
Trademark
Accounts Receivable
Notes Payable

Cash and Accounts Receivable

Which of the following are included in current liabilities
Note payable to a supplier in 13 months
Amount due from a customer last week
Account payable to a supplier that is due next week
Loan payable to the bank in 10 months

Account payable to a supplier that is due next week
Loan payable to the bank in 10 months

Which one of the following statements concerning net working capital is correct?

Net working capital may be a negative value

A business partner whose potential financial loss in the partnership will not exceed his or her investment in that partnership is called

Limited partner

Grandma gave you a $100 US Savings bond for your middle school graduation which matures at high school graduation. What is the value of your US Savings bond at high school graduation?

$100.00

Which of the following accounts are ALWAYS included in working capital management
Accounts Payable
Accounts Receivable
Fixed Assets
Inventory

Accounts payable and Accounts receivable

Which one of the following best describes the primary advantage of being a limited partner instead of a general partner?

Maximum loss limited to the capital invested

Which of the following represent cash outflows from a corporation?
Issuance of Securities
Payment of dividends
New loan proceeds
Payment of government taxes

Payment of dividends and Payment of government taxes

The sources and uses of cash over a period are reflected on the

Statement of cash flow

Which one of the following is a source of cash for a firm?

Sale of common stock

Which is a measure of a company's liquidity?

Quick ratio

What are bond yields are the combined effect of

Inflation
Rate risk
Default risk
Taxability

What does the phrase "inversely proportional" mean when it comes to bonds?

Interest rates declining, bond values increasing

Interest earned on both the initial principal and the interest reinvested from the prior periods is called

Compound interest

Wells Fargo is charging you 1.5% per month on your credit card. What is your Annual Percentage Rate (APR)?

18%

Justin Verlander invested $2,000 six years ago at 7.5%. He spends his earnings as soon as he earns any interestso he only receives interest on his initial investment. Which type of interest is Mr. Verlander earning this year?

simple interest

Which best describes an auction market?

London Stock exchange

Which bond is 100% exempt from being taxed in the United States?
US Treasury
Zero Coupon
Municipal
Corporate

Municipal

What does a market dealer do?

Buys and sells for his/her own account

Which is the best example of an interest only (I/O) security?

Corporate bond

Twitter had a 2022 profit before tax of $10,000,000, a tax rate of 20%, and debt due in 2028 of $19,000,0000. Its depreciation and amortization for 2022 aggregates $3,000,000. What is Twitter's approximate cash flow in 2022?

11,000,000

What is the real rate of interest?

Interest rate less the inflation rate.

Which security has a "residual claim" on a company's cash flows?

Equity

What is the best definition of a derivative?

A security where the value is based on the value of another security

A Pfizer bond pays an 8% coupon rate on a bond provided that its return on equity (ROE) exceeds 8^. Which type of security is this?

Income bond

Which two cash flows are received by a typical bond?

Interest and principal at maturity

A bonds coupon rate is equal to the annual interest divided by which one of the following:

Face Value

Don Cheadle attended your high school and today gave all recent alums of his alma mater a $100 US Savings bond that matures in one year, including yourself. If the value of what he paid for your bond is $90.90, what your bond's discount rate?

10%

Shari Belafonte earned $500,000 for a one-night singing gig in Macau, a zero-tax jurisdiction. She immediately wired those funds as a three-year bank deposit in Jamaica. Ms. Belafonte earns 7% on her money each year. What is the value of her deposit after three years?

612,522

Kodai Senga just signed a two-year pitching contract with the New York Mets at $1,000,000 per year. His tax rate is 40%, and receives his money at the end of the year. He lives with his Shohei Ohtani in Queens and doesn't have any expenses. He deposits his wages at the end of every year at a rate of 5.0%. What is the value of Senga- san's deposit after year two?

1,230,000

Former President Barack Obama goes on the university speaking circuit for three months per year. He receives $250,000 net of taxes per speaking engagement. His speaking engagements are monthly and began January 31, 2023. To date, he has spoken at Stanford and Johns Hopkins. His last stop will be at Albany on March 31, 2023. President Obama deposits his funds in his account at Cape Cod Bank & Trust as soon as he receives them. He earns 12% on his deposit per annum paid monthly. What is the cumulative value of his money for the quarter on March 31, 2023?

757,525

A bank quotes an interest rate of 14% per annum on your auto loan, which compounds monthly. What is the 14% interest ratecalled?

Stated

Company has sales of $21,000, costs of $11,200, depreciation expense of $2,300, and interest expense of $1,300. If the tax rate is 40 percent, what is the operating cash flow, or OCF?

OCF $7320 = EBIT $7500+Depreciation $2300-Taxes $2480

The UALbanyBusiness Investment Group (UABIG) purchased 14,750 shares of Firestone Tire at $1.50/share one year ago today. UABIG disposes the shares at $1.25/share today. During the period, Firestone shares yielded 2.0%. What was UABIG's total return on itsFirestone investment?

negative 14.7%

Protective covenants

Are primarily designed to protect bondholders

The process of determining the present value of future cash flows to know their worth today is referred to as

Discounted cash flow valuation

Joe's Car Wash balance sheet shows current assets of $6,300, fixed assets of $32,000, total long-term liabilities of $16,200and total equity of $18,100. What is Joe's Car Wash current ratio?

1.58x

You received a $100 bond as a gift. The bond will mature in 1 year and yields 6% annually. How much was paid for this bond?

$94.34

You have $500 today in an account yielding 10% annually. In one year, you will deposit another $500 which will also yield10% annually. Assuming annual compounding, how much will you have in the account two years from today?

1155

You receive a perpetual cash flow of $3,000 every year at a rate of 12%. What is the value of this investment

25,000

You are offered a rate of 8% compounded monthly. What is your effective annual rate?

8.6%

Your former classmate, Etan, works at Morgan Stanley. You call him up to place a short sell market order on 50,000 shares of Alibaba (BABA.US). Morgan Stanley is not a market maker for this security. What is Etan's role for this specific transaction?

Broker

Which is a money market security?

T bill

What is the normal yield curve?

Long term rates exceed short term rates

Which represents the total return on a common stock?

Capital gains yield and Interest yield

What is the best definition of corporate finance

Financial decisions and how they impact the value of a company

Which is the best definition of an annuity?

A cash flow stream where a fixed amount is received every year

Based in Chicago, John Ricketti(aka "the Noodle") is employed as a broker for Bank of America Merrill Lynch (BAML). Who is the Noodle's and BAML's primary regulator?

Securities and exchange commission

Which best explains a sukuk?

Non-interest paying security

Who is the current US Treasury Secretary?

Janet Yellen

Which financial statements did we not review in detail in class?

CitiGroup

What does your professor think of the Dividend Discount Model/Gordon Growth Model?

Thinks it never provides anything close to the correct answer due to the number of assumptions

You purchase a run-down home in Albany for $25,000 and spend another $25,000 to repair it. Your total in-cost is $50,000. When the work is done, you place the home back on the market and find that it's worth $60,000. What is your NPV?

$10,000

What is the difference between an investment's market value and cost?

Net Present Value (NPV)

As a financial manager, what will you do with an investment if its Net Present Value (NPV) is negative?

Reject the investment

Which investment technique yields the same result as Net Present Value (NPV)?

Internal Rate of Return

Which statement is true regarding the Internal Rate of Return (IRR)?

- It is the most important alternative to Net Present Value - The IRR is a single rate of return which summarizes the merits of the project
- It is the discount rate which makes the Net Present Value of an investment equate to zero
- An investment is acceptable if its IRR exceeds the required return

What is the best definition of an opportunity cost?

The most valuable investment alternative given up if a particular investment is undertaken

An example of erosion when taking on a new project would be?

Disney adding a new park in Shanghai which would erode or cannibalize Hong Kong Disney and Tokyo Disney revenues

Which type of company analysis only allows for one variable to change?

Sensitivity Analysis

Which type of company analysis considers the inter-relationships between different cash flow components?

Break even analysis

Which of the following is a true statement about "operating leverage"?

- The greater the degree of operating leverage, the greater the potential for forecasting risk
- Suggests that a business is capital intensive
- The degree to which a business relies on fixed costs
- Small errors in operating leverage can magnify problems in forecasting

How is return on investment (ROI) of an equity security calculated?

Adding the capital gain percentage to the dividend yield

How is return volatility on a security measured?

Variance and standard deviation, Normal distribution and Bell curve

Brandon Nimmo has a $10,000,000 portfolio, of which $500,000 is in bond, $3,000,000 is in alternative investments, and the remainder in equities. What is his equity portfolio weight?

65%

Tom "Tom Terrific" Seaver is looking to eliminate unsystematic risk in his portfolio which comprises 2 mm shares of Tesla. What is the best way he can go about doing that?

Diversify with shares in multiple industries

Mike Piazza is asking you to tell him about the Capital Asset Pricing Model (CAPM). What will you tell him?

- CAPM shows the expected return for a particular asset- - CAPM incorporates the pure time value of money
- CAPM explains the reward for bearing systematic risk
- CAPM alerts you to the amount of systematic risk of a particular security

Carlos "Cookie" Carrasco is looking to build a winter home on Margarita Island in his native Venezuela. The amount of money he will spend is $17 mn. He will finance the new home with $14 mn in borrowings at 7%, and the remainder with equity. If Mr. Carrasco calculates his weighted average cost of capital (WACC) at 15%, what would his cost of equity be?

10.25%

The Flushing Queens Brewery is 70% funded with debt at an after-tax cost of 9%, while the cost of equity is 12%. What is the Flushing Queens Brewery weighted average cost of capital (WACC)?

9.9%

How is the cost of equity calculated?

Dividend Growth model approach, Security Market Line approach and Bloomberg terminal

Which one of the following is the financial statement which shows the accounting value of a firm's equity as of a particular date?

Balance sheet

Net working capital is defined as:

Current assets minus current liabilities

Which one of these set forth the common set of standards and procedures by which audited financial statements are prepared?

Generally Accepted Accounting Principles

Which one of the following accounts is the most liquid?

Accounts Receivable

The process of planning and managing a firm's long-term investments is called?

Capital Budgeting

Which of the following forms of business organization is subject to double taxation?

Corporation

Technically, control of a firm ultimately rests with

Shareholders

If a company in in violation of a financial covenant, and is precluded from accessing funding to undertake a positive NPV project, what type of situation what kind of capital rationing would this be considered?

Hard rationing

Steve "Uncle Stevie" Cohen is speaking to Sandy Alderson about "efficient capital markets theory". Uncle Stevie would be correct if he stated the following about "efficient capital markets"

- A market in which a security trades is priced efficiently
- Based on available information, there is no reason that the current share price is too high or too low
- Although market inefficiencies may exist, they are relatively small and uncommon
- The theory is nonsense and is just taught so professors can sell textbooks

What are pro forma financial statements?

Financial statement projecting future years operations

What is SpaceX’s profit margin, if it has net income of $50,000 and total revenue of $200,000? (10/67)

25%

American Airlines has net income of $500,000 and shareholders’ equity of $2,000,000. What is AA’s Return on Equity (ROE)?

25%

Alphabet had $200,000 in cost of goods sold (COGS) and an average inventory value of $50,000. What is the inventory turnover ratio for Alphabet?

4

SingTel has total liabilities of $500,000 and total assets of $1,000,000. What is SingTel’s debt ratio?

50%

Cathay Pacific has current assets of $200,000 and current liabilities of $150,000. What is Cathay Pacific’s current ratio?

1.2

What does the time value of money (TVM) concept primarily emphasize?

The importance of considering the timing of cash flows when making financial decisions

What does the current ratio measure?

Short-term liquidity

Microsoft has a stock price of $60 per share and earnings per share (EPS) of $4.50. The company recently announced a 2-for-1 stock split, and as a result, the number of outstanding shares has doubled. Calculate the new P/E ratio for Microsoft after the stock split

13.3

You have a $600 deposit and invest it at 8% a year for two years at Flagstar Bank, compounding semi-annually. What will be the approximate value be in two years?

$702

Jennifer Aniston needs to have $3,000 two years from today. Assuming that Ms. Aniston earns interest at 10% compounded annually, how much will she need to invest today to have $3,000 two years from today?

2479

You receive a perpetual cash flow of $800 every year at a rate of 4%. What is the value of this investment?

$20,000

Which of the following best describes the primary purpose of the Federal Reserve in the United States?

Monetary policy regulation