devry fin515 week 4 midterm latest 2016 july

1. Question : (TCO A) The distinguishing feature of a corporation is that:

there is no legal difference between the corporation and its owners.

it is a legally defined, artificial being, separate from its owners.

it spreads liability for its corporate obligations to all shareholders.

provides limited liability only to small shareholders.

Question 2. Question : (TCO A) If shareholders are unhappy with a CEO's performance, they are most likely to:

buy more shares in an effort to gain control of the firm.

file a shareholder resolution.

replace the CEO through a grassroots shareholder uprising.

sell their shares

Question 3. Question : (TCO A) The firm's equity multiplier measures

the value of assets held per dollar of shareholder equity.

the return that the firm has earned on its past investments.

the firm's ability to sell a product for more than the cost of producing it.

how efficiently the firm is utilizing its assets to generate sales.

Question 4. Question : (TCO B) When we express the value of a cash flow or series of cash flows in terms of dollars today, we call it the _____ of the investment. If we express it in terms of dollars in the future, we call it the _____.

present value; future value

future value; present value

ordinary annuity; annuity due

discount factor; discount rate

Question 5. Question : (TCO D) Which of the following statements is FALSE?

Bonds are securities sold by governments and corporations to raise money from investors today in exchange for promised future payments.

By convention, the coupon rate is expressed as an effective annual rate.

Bonds typically make two types of payments to their holders.

The time remaining until the repayment date is known as the term of the bond.

Question 6. Question : (TCO D) Which of the following statements is FALSE?

We should use the general dividend discount model to value the stock of a firm with rapid or changing growth.

As firms mature, their growth slows to rates more typical of established companies.

The dividend discount model values the stock based on a forecast of the future dividends paid to shareholders.

The simplest forecast for the firm’s future dividends states that they will grow at a constant rate, g, forever.

1. Question : (TCO B) A certain investment will pay $10,000 in 20 years. If the annual return on comparable investments is 8%, what is this investment currently worth? Show your work.

Question 2. Question : (TCO B) You take out a 4-year car loan for $18,000. The loan has a 4% annual interest rate. The payments are made monthly. What are the monthly payments? Show your work.

Question 3. Question : (TCO D) A particular bond has 8 years to maturity. It has a face value of $1,000. It has a YTM of 7% and the coupons are paid semiannually at a 10% annual rate. What does the bond currently sell for? Show your work.

Question 4. Question : (TCO D) A bond currently sells for $1,030 even though it has a par of $1,000. It was issued 2 years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? Show your work.

Question 5. Question : (TCO D) A stock has just paid a dividend and will pay a dividend of $3.00 in a year. The dividend will stay constant for the rest of time. The return on equity for similar stocks is 14%. What is P0? Show your work.

Question 6. Question : (TCO D) A stock has just declared an annual dividend of $2.25 to be paid one year from today. The dividend is expected to grow at a 7% annual rate. The return on equity for similar stocks is 12%. What is P0? Show your work.

1. Question : (TCO A) The DuPont Identity expresses the firm's ROE in terms of? Explain in details.