Corporate governance has become increasingly important over the years. The Sarbanes-Oxley (SOX) Act

Corporate governance has become increasingly important over the years. The Sarbanes-Oxley (SOX) Act was enacted to improve transparency in financial accounting and to prevent fraud. Which of the following is correct?

·	· fraud has not occurred since enactment of SOX
·	· SOX has not increased auditing costs
·	· government agencies are not required to comply withSOX
·	· SOX requires companies to have a strong board ofdirectors
·	· none of the above

Tactics that firms use to avoid hostile takeovers include:

·	· greenmail
·	· shareholder rights provisions.
·	· restricted voting rights.
·	· poison pills.
·	· all of the above

Both Adams and Wolfe are large public corporations with subsidiaries throughout the world. Adams uses a centralized approach and makes most of the decisions for its subsidiaries. Wolfe uses a decentralized approach and its subsidiaries make most of their own decisions. Which of the following is correct?

	· the agency problem would probably be more pronounced for Wolfe because of a higher probability that subsidiary decisions would conflict with the parent
	· agency costs would be the same for both companies
	· a decentralized approach is almost always better
	· a centralized approach is almost always better
	· none of the above

With convertible bonds,

	· the company receives additional cash money when the convertibles are converted.
	· Investors are willing to accept a lower interest rate on a convertible than on otherwise similar straight debt
	· Investors require a higher interest rate than on otherwise similar straight debt
	· the convertibles cannot be converted for at least 10 years
	· none of the above

A firm's common stock currently sells for $17.50. Its 10% convertible bonds (issued at par $1000) now sell for $900 and the conversion price is $20. What is the conversion ratio?

	· 87.5
	· 17.5
	· 50.0
	· 45.00
	· none of the above

Convertible bonds are:

·	· considered equity on the balance sheet
·	· similar in risk to the company's common stock
·	· riskier than the company's common stock
·	· less risky than the company's common stock
·	· none of the above

KORO Corporation's common stock currently sells for $27.50. Its 8% convertible bonds (issued at par $1000) now sell for $950. The bonds can be converted into 40 shares of common stock. What is the conversion price?

·	· $25
·	· $40
·	· $23.50
·	· $38
·	· none of the above

KORO Corporation's common stock currently sells for $27.50. Its 8% convertible bonds (issued at par $1000) now sell for $950. The bonds can be converted into 40 shares of common stock. What is the conversion value of the bond?

	· $688
	· $593.75
	· $950
	· $1,100
	· none of the above

Which of the following is correct?

· Warrants are similar to long-term put options

· The company receives additional funds when warrants are exercised

· The company receives additional funds when bonds are converted

· Warrants can sometimes be detached and traded separately from the debt with which they were issued, but this is unusual.

· none of the above

A company will issue 20-year bonds with annual interest payments. Each bond will include 20 warrants that give the holder to purchase one share of stock per warrant. Each warrant is expected to have a value of $5.75. A similar straight-debt issue would require an 8% coupon. What coupon rate should be set on the bonds with warrants so that the package will sell for $1,000?

·	· 5.76%
·	· 6.83%
·	· 7.94%
·	· 6.98%
·	· none of the above