QUIZ#2- ACCOUNTING AND FINANCE

Dosen Pengajar: Sulad Sri Hardanto,MM, MBA, CWM, PFM.

Hari, Tanggal : Sabtu, 25 November 2023
Waktu : 90 menit

Email *

alifsetyatrikardo@mail.ugm.ac.id

Nama: *

Alif Setya Trikardo

Nomor Mahasiswa

23/524234/NEK/27823

Pilihlah salah satu jawaban yang menurut Anda benar

A project has the following cash flows: C0 = −100,000; C1 = 50,000; C2 = 150,000;
C3 = 100,000. If the discount rate changes from 12 percent to 15 percent, what is
the CHANGE in the NPV of the project (approximately)?

a. 12,750 in crease

b. 12,750 de crease

c. 14,240 in crease

d. 14,240 de crease

Using a company's cost of capital to evaluate a project is

I) always correct;

II) always incorrect;

III) correct for projects that have average risk compared to the firm's other assets

a. I only

b. II only

c. III only

d. I and III only

The slope of the regression line that exhibits the past relationship between a
stock's returns and the market's returns is the:

a. market's beta.

b. stock's beta.

c. market risk premium.

d. stock's standard deviation

 If a firm uses the same company cost of capital for evaluating all projects, which
situation(s) will likely occur?
I) The firm will reject good low-risk projects;

II) The firm will accept poor high-risk projects;

III) The firm will correctly accept projects with average risk

a. I only

b. I and II only

c. I,II, and III

d. II only

A stock return's beta measures

a. the stock's covariance with the risk-free asset.

b. the change in the stock's return for a given change in the market return.

c. the return on the stock.

d. the standard deviation on the stock's return.

The following options associated with a project increase managerial flexibility:

I) option to expand;

II) option to abandon;

III) production options;

IV) timing options

a. I only

b. II only

c. I, II, III, and IV

d. IV only

An aging schedule illustrates the relationship between:

a. the time history with a customer and the number of repeat sales.

b. the average sale size and profitability over time.

c. customer ages and the average size of sales.

d. an accounts receivable and its time outstanding.

The correlation coefficient measures the

a. rate of return of individual stocks.

b. direction of movement of the return of individual stocks.

c. degree to which the returns of two stocks move together.

d. degree of s unique risk present in the standard deviations of a pair of stocks.

The accounting break-even point occurs when

a. the total revenue line cuts the fixed cost line.

b. the present value of inflows line cuts the present value of outflows line.

c. the total revenue line cuts the total cost line.

d. total revenue is large enough to recapture depreciation expense.

A firm might categorize its projects into

I) cost improvements;

II) expansion projects (existing business);

III) new products;

IV) speculative ventures

a. III only

b. I, II, and III only.

c. II and IV only

d. I, II, III, and IV

The cost of capital for a project depends on

a. the company's cost of capital.

b. the use of the capital (the project).

c. the industry cost of capital.

d. the company's level of debt financing.

The market value of Cable Company's equity is $60 million and the market value of
its debt is $40 million. If the required rate of return on the equity is 15 percent and
that on its debt is 5 percent, calculate the company's cost of capital. (Assume no
taxes.)

a. 15 percent

b. 10 percent

c. 11 percent

d. 9 percent

Which of the following types of projects has the lowest unique risk?

a. Speculative ventures

b. New products

c. Expansions of existing business

d. Cost improvements

The company cost of capital may be an inappropriate discount rate for a capital
budgeting proposal if:

a. it results in a negative NPV for the proposal.

b. the proposal has a different degree of risk.

c. the company has unique risk.

d. the company expects to earn more than the risk-free rate.

The weighted-average cost of capital for a firm with a 65/35 debt/equity split, 8%
pre-tax cost of debt, 15% cost of equity, and a 35% tax rate would be:

a. 8.63%.

b. 9.12%.

c. 10.45%.

d. 13.80%.

One would expect a stock with a beta of 1.25 to increase in returns

a. 25 percent more than the market in up markets.

b. 25 percent more than the market in down markets.

c. 125 percent more than the market in up markets.

d. 125 percent more than the market in down markets.

How are investors most apt to interpret a reduction in a firm's regular dividend
payment?

a. Earnings are expected to decline.

b. New investments are expected to increase.

c. Stock repurchases are expected to increase.

d. Share price is expected to increase.

A firm's cost of equity can be estimated using the

a. Fama-French three-factor model.

b. capital asset pricing model (CAPM).

c. arbitrage pricing theory (APT).

d. All of the options are correct

The correlation coefficient between the efficient portfolio and the risk-free asset is

a. +1.0.

b. −1.0.

c. 0.0.

d. Further information is needed.

A policy of dividend "smoothing" refers to:

a. maintaining a constant dividend payout ratio.

b. keeping the regular dividend at the same level indefinitely

c. maintaining a steady progression of dividend increases over time.

d. alternating cash dividends with stock dividends.

The beta of the market portfolio is

a. 0.0.

b. +0.5.

c. −1.0.

d. +1.0.

What is the change in cash for a firm with the following: $10,000 cash flow from
operations, $1,600 cash used for new investment, a reduction in the level of debt of
$2,000, $1,000 in cash dividends, and $200 in depreciation expense?

a. $5,600

b. $9,600

c. $9,400

d. $5,400

Assume the following data for a stock: Beta = 0.9; risk-free rate = 4 percent; market
rate of return = 14 percent; and expected rate of return on the stock = 13 percent.
Then the stock is

a. overpriced.

b. underpriced.

c. correctly priced.

d. The answer cannot be determined.

The purpose of a sinking fund is to:

a. reduce the par value of stock over time.

b. take advantage of the tax break on preferred stock.

c. allow risky corporations to avoid bankruptcy.

d. periodically retire debt prior to final maturity

Suppose the beta of Amazon is 2.2, the risk-free rate is 5.5 percent, and the market
risk premium is 8 percent. Calculate the expected rate of return for Amazon.

a. 15.8 percent

b. 14.3 percent

c. 35.2 percent

d. 23.1 percent

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