Corporate Finance

CORPORATE FINANCE Tổng điểm 72/100
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You are considering adding a microbrewery on to one of your firm's *2/2

existing restaurants. This will entail an investment of $40,000 in new
equipment. This equipment will be depreciated straight line over five
years. If your firm's marginal corporate tax rate is 21%, then what is the
value of the microbrewery's depreciation tax shield in the first year of
operation?
$1680
$5200
$14,000
$26,000
:
Dagny Taggart has just purchased a home and taken out a $400,000 *0/2
mortgage. The mortgage has a 30-year term with monthly payments and
has an interest rate of 5.4%. Dagny's monthly payments are closest to:
$2215.
$1800.
$2245.
$1110.
Câu trả lời đúng
$2245.
:
Pentonic Inc. is trying to determine if it should start production of a new *2/2
range of high-speed autofocusing cameras with APS-C over a five-year
project life. You have been hired to help evaluate the investment and
make a recommendation to the Pentonic Inc. board of directors. The
production of this new line of cameras will require the purchase of
specialised equipment costing $2,400,000. The equipment costs an
additional $400,000 to install. The system will be depreciated on a
straight-line basis to a zero balance over its eight-year life. The
manufacturer has contracted to buy the equipment back from you for
$100,000 at the end of the project. The tax rate is 30%. Keep all pennies
in your calculations. What is the after-tax salvage value of the
specialized equipment at the end of the five-year project
life?
$70,000
$175,000
$280,000
$385,000
:
Lakeside Winery is considering expanding its wine-making operations. *2/2
The expansion will require new equipment costing $649,000 that would
be depreciated on a straight-line basis to a zero balance over the four-
year life of the project (asset life = project life). The salvage value of the
equipment at the end of the project life is $187,000. The project requires
$38,000 initially for net working capital, all of which will be recovered at
the end of the project. The projected revenue per year is $357,000,
variable costs per year are expected to be 10% of the projected revenue
and the expected fixed cost per year is $107,000. Assume using a
corporate tax rate of 30% and a cost of capital of 8%. What is the free
cash flow at the end of year 1, (i.e. at t=1)?
$198,685
$36,435
$52,050
$214,300
:
The Sisyphean Corporation is considering investing in a new cane *2/2
manufacturing machine that has an estimated life of three years. The
cost of the machine is $30,000 and the machine will be depreciated
straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in

year 1. Sales are estimated to grow by 10% per year each year through
year three. The price per cane that Sisyphean will charge its customers is
$18 each and is to remain constant. The canes have a manufacturing
cost of $9 each.
Installation of the machine and the resulting increase in manufacturing

capacity will require an increase in various net working capital accounts.
It is estimated that the Sisyphean Corporation needs to hold 2% of its
annual sales in cash, 4% of its annual sales in accounts receivable, 9% of
its annual sales in inventory, and 6% of its annual sales in accounts
payable. The firm is in the 21% tax bracket, and has a cost of capital of
10%.
The depreciation tax shield for the Sisyphean Corporation's project in the
first year is closest to
$2800.
$2100.
$5200.
$8000.
:
cash flow at the start of the project, t=0?
-$649,000
-$687,000
-$187,000
-$38,000
:
The expected return for Alpha Corporation is closest to: * 2/2
10%.
6.67%.
5.00%.
0.00%.
:
Assume the appropriate discount rate for this project is 15%. The IRR for *2/2
this project is closest to:
60%.
22%.
15%.
21%.
The current price of Viva Titan Ltd shares is $75. Dividend one year from *2/2
today is $1.05 and is expected to grow thereafter at 5% indefinitely. What
is the required rate of return on Viva Titan’s shares?
6.00%
6.40%
7.41%
9.14%
:
You are saving for retirement. To live comfortably, you decide that you will *2/2
need $2.5 million by the time you are 65. If you assume you are able to do
that, and will live 20 more years (until age 85), the amount you can
withdraw at the end of each of those years at an interest rate of 5%
before your retirement fund is empty is closest to:
$200,606.
$197,987.
$75,606.
$72,987.
Taggart Transcontinental has a dividend yield of 2.5%. Taggart's equity *2/2

cost of capital is 10%, and its dividends are expected to grow at a
constant rate. Based on this information, Taggart's constant growth rate
in dividends is closest to:
2.5%.
5.0%.
7.5%.
10.0%.
:
Consider the following timeline: *2/2
If the current market rate of interest is 7%, then the future value of the
cash flows on this timeline as of year 3 is closest to:
$1500.
$1404.
$1717
$1720.
:
Consider the following four alternatives: *2/2
1. $132 received in two years.
2. $160 received in five years.
3. $200 received in eight years.
4. $220 received in ten years.
The ranking of the four alternatives from most valuable to least valuable
if the interest rate is 7% per year would be:
3, 1, 2, 4.
1, 2, 3, 4.
3, 4, 2, 1.
4, 3, 2, 1.
Dagny Taggart has just purchased a home and taken out a $400,000 *2/2
mortgage. The mortgage has a 30-year term with monthly payments and
has an interest rate of 5.4%. The total amount of interest that Dagny will
pay during the first month of her mortgage is closest to:
$1800.
$1110.
$1785.
$2245.
:
You have $20,000 invested in a share portfolio, made up of $10,000 of *0/2
shares in D company and $5,000 of shares in each of E and F companies.
The expected return on D shares is 10%, the expected return on E shares
is 12% and the expected return on F shares is 14%. What is the expected
return on your share portfolio?
11.0%
11.5%
12.0%
12.5%
11.5%
:
If the current market rate of interest is 8%, then the future value of this *2/2
stream of cash flows is closest to:
$10,339
$12,635.
$11,699.
$10,832.
:
Your project has a depreciation expense of $450,000 and a corporate tax *2/2
rate of 35%. Which ONE of the following statements is correct about the
depreciation tax shield from the given information?
The tax savings of $157,500 comes from the ability to deduct depreciation,
which reduces EBIT (taxable income) and as a result has a positive impact on
operating cash Pow.
The tax savings of $157,500 comes from the ability to deduct depreciation, which
increases EBIT (taxable income) and as a result has a positive impact on
operating cash Pow.
The tax savings of $157,500 comes from the ability to add back depreciation,
which increases EBIT (taxable income) and as a result has a positive impact on
operating cash Pow.
The tax savings of $607,500 comes from the ability to claim tax credit on
depreciation expense and as a result has a positive impact on operating cash
Pow
:
If the YTM of these bonds increased to 9%, which bond's price would be *0/2
most sensitive to this change in YTM?
4
:
Suppose a ten-year bond with semiannual coupons has a price of *2/2
$1,071.06 and a yield to maturity of 7%. This bond's coupon rate is
closest to:
6.0%.
3.5%.
7.0%.
8.0%.
:
corporate tax rate of 30% and a cost of capital of 8%. What is the
depreciation expense for each year?
$162,250
$129,800
$324,500
$115,500
$162,250
:
Suppose the current zero-coupon yield curve for risk-free bonds is as *2/2
follows:
The price per $100 face value of a three-year, zero-coupon, risk-free bond
is closest to:
$93.80.
$90.06
$86.39.
$89.16.
:
in your calculations. What is the total initial capital expenditure for the
investment?
$400,000
$2,400,000
$2,800,000
$3,000,000
Which of the following is NOT a diversifiable risk? * 2/2
The risk of a product liability lawsuit
The risk that oil prices rise, increasing production costs
The risk of a key employee being hired away by a competitor
The risk that the CEO is killed in a plane crash

:
CLASS CODE *
FIN1
FIN2
FIN3
FIN4
Which of these bonds sells at a discount? * 2/2
4
:
You are saving for retirement. To live comfortably, you decide that you will *2/2
need $2.5 million by the time you are 65. Today is your 30th birthday, and
you decide, starting today, and on every birthday up to and including your
65th birthday, that you will deposit the same amount into your savings
account. Assuming the interest rate is 5%, the amount that you must set
aside each year on your birthday is closest to:
$26,260.
$27,680.
$71,430.
$26,100.
Use the information for the question(s) below. *2/2
The Sisyphean Company has a bond outstanding with a face value of

$1000 that reaches maturity in 15 years. The bond certificate indicates
that the stated coupon rate for this bond is 8% and that the coupon
payments are to be made semiannually. Assuming the appropriate YTM
on the Sisyphean bond is 9.0%, then the price at which this bond trades
will be closest to:
$1086.
$919.
$1000.
$946.
:
Kay Williams is interested in buying the ordinary shares of Green Property *2/2
Limited which are currently priced at $37.45 for one share of stock. Green
Property Limited expects to pay a dividend of $2.58 one year from today
and expects that the $2.58 dividend will then grow at 7% per year
thereafter from year 1 into the indefinite future. If Kay expects a required
rate of return of 14% from her investment in this share, which one of the
following statements is correct?
Kay Williams should not buy shares of Green Property Limited because the
intrinsic value for a share of stock is $36.86, which is worth less than the
current trading price in the market.
Kay Williams should buy shares of Green Property Limited because the intrinsic
value for a share of stock is $36.86, which is worth less than the current trading
price in the market
Kay Williams should buy shares of Green Property Limited because the intrinsic
value for a share of stock is $39.44, which is worth more than the current trading
price in the market
Kay Williams should not buy shares of Green Property Limited because the
intrinsic value for a share of stock is $39.44, which is worth more than the current
trading price in the market
Option 5
:
At an annual interest rate of 7%, the future value of this timeline in year 3 *2/2
is closest to:
$3295.
$3771.
$4035.
$3600.
Read all of the following choices. Which one is FALSE? * 2/2
When interest rates rise, bond prices fall
Short-term bonds have less interest rate risk than long-term bonds
Bond price risk is also called interest rate risk
Bonds are generally riskier assets than ordinary stocks

:
in your calculations. What is the depreciation expense for each year?
$30,000
$300,000
$337,500
$350,000
:

payments are to be made semiannually.
Assuming the appropriate YTM on the Sisyphean bond is 7.5%, then the
price at which this bond trades will be closest to:
$691.
$957.
$1045.
$1000.
The Building Company Limited has just paid a dividend of $1.40 per *2/2
share. The company is expanding very fast and is expected to grow at a
rate of 25% for the next two years. After year two, the dividend is
expected to settle to a constant growth rate of 2% annually into the
indefinite future. What is the fair value for one share of the Building
Company stock if the market required rate of return is 12%?
$9.50
$19.19
$21.09
$22.10
:
The Sisyphean Company is planning on investing in a new project. This *2/2
will involve the purchase of some new machinery costing $450,000. The
Sisyphean Company expects cash inflows from this project as detailed
below:
The payback period for this project is closest to:
3.0 years.
2.2 years.
2.1 years.
2.0 years.
NAME OF MEMBER *
Lê Hà Xuân Mai
Huỳnh Trần Hồng Ân
Lương Thể Thanh Hiền
Lê Như Quỳnh
Trần Khánh Vy
:
At an annual interest rate of 7%, the present value of this timeline in year *0/2
0 is closest to
$3771.
$4035.
$3080.
$3600.
$3080.
:
Temporary Housing Services Incorporated (THSI) is considering a project *0/2
that involves setting up a temporary housing facility in an area recently
damaged by a hurricane. THSI will lease space in this facility to various
agencies and groups providing relief services to the area. THSI estimates
that this project will initially cost $5 million to set up and will generate
$20 million in revenues during its first and only year in operation (paid in
one year). Operating expenses are expected to total $12 million during
this year and depreciation expense will be another $3 million. THSI will
require no working capital for this investment. THSI's marginal tax rate is
21%.
Ignoring the original investment of $5 million, what is THSI's free cash

flow for the first and only year of operation?
$8.0 million
$3.75 million
$5.0 million
$6.95 million
$6.95 million
:
Rearden Metals is considering opening a strip-mining operation to *0/2
provide some of the raw materials needed in producing Rearden metal.
The initial purchase of the land and the associated costs of opening up
mining operations will cost $100 million today. The mine is expected to
generate $16 million worth of ore per year for the next 12 years. At the
end of the 12th year Rearden will need to spend $20 million to restore the
land to its original pristine nature appearance. The payback period for
Rearden's mining operation is closest to:
6.00 years.
6.25 years.
6.50 years.
5.00 years.
6.25 years.
:
corporate tax rate of 30% and a cost of capital of 8%. What is the NPV of
the project and based on your NPV analysis of the project should
Lakeside Winery proceed with the winery expansion?
NPV=$0; reject project because NPV is $0.
NPV= $67,285.33; accept project because NPV is greater than $0.
NPV= -$28,930.08; reject project because NPV is less than $0.
NPV=$95,216.46; accept project because NPV is greater than $0
NPV=$95,216.46; accept project because NPV is greater than $0

:
The NPV for project Alpha is closest to: * 0/2
$24.01.
$16.92.
$20.96.
$14.41
$16.92.
:

payments are to be made semiannually.
Assuming the appropriate YTM on the Sisyphean bond is 7.5%, then this
bond will trade at:
par
discount
premium
None of the above
The operating cash flow for project Genesis at the end of its eight-year *2/2
project life is $2,800,000. You also forecasted that $410,000 of cash
previously invested in inventories will get freed up in year eight when the
investment in working capital get retired in full. You do not expect other
types of cash flows in that given year. What is the free cash flow in year
eight given a corporate tax rate of 30%?
-$2,390,000
$2,390,000
-$3,210,000
$3,210,000
:
Bond X is a 4% coupon bond. Bond Y is a 10% coupon bond. Both bonds *0/2
are currently priced at par ($1,000). They have 10 years to maturity and
make half-yearly coupon payments.
What is the percentage price change for each of these bonds if YTM fall
by 2%?
Bond X price increases by 18.05%; Bond Y price increases by 13.43%.
Bond X price decreases by 17.97%; Bond Y price decreases by 13.43%.
Bond X price increases by 17.97%; Bond Y price increases by 13.43%.
Bond X price increases by 18.05%; Bond Y price increases by13.59%
Bond X price increases by 18.05%; Bond Y price increases by13.59%

:
Which of the following statements is correct? * 0/2
You should accept project B since its IRR < 15%.
You should accept project A since its IRR > 15%.
You should reject project B since its NPV > 0.
You should accept project A since its NPV < 0.
You should accept project A since its IRR > 15%.

:
Project G costs $125,000 and generates cash inflows of $15,000 per *0/2
annum forever (i.e., $15,000 at t=1, t=2, t=3, etc.). Looking at the following
possible discount rates (i.e., required rates of return), which is the highest
discount rate for which the project is accepted by the IRR rule?
17%
15%
13%
11%
11%
:
cash flow at the end of year 4, (i.e. at t=4)?
$367,585
$130,900
$38,000
$329,585
:
The internal rate of return (IRR) for project A is closest to: * 2/2
42.9%.
21.6%.
7.7%.
23.3%.
The NPV for this project is closest to: * 0/2
$450,000.
$179,590.
$176,270.
$123,420.
$176,270.
:
Which of the following is NOT a systematic risk? * 2/2
The risk that oil prices rise, increasing production costs
The risk that the economy slows, reducing demand for your nrm's products
The risk that the Federal Reserve raises interest rates
The risk that your new product will not receive regulatory approval
Nielson Motors has a share price of $50.00. Its dividend was $2.50, and *2/2
you expect Nielson Motors to raise its dividend by approximately 6% per
year in perpetuity. If Nielson's equity cost of capital is 13%, then Nielson's
expected share price is closest to
$35.71.
$19.23.
$37.86.
$50.00
:
If the current market rate of interest is 9%, then the present value of the *2/2
cash flows on this timeline as of year 0 is closest to:
$600.
$400.
$492.
$637.
:

payments are to be made semiannually. Assuming that this bond trades
for $1112, then the YTM for this bond is closest to:
8.0%.
9.2%.
6.8%.
3.4%.
6.8%.
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CORPORATE FINANCE Tổng điểm 72/100

You are considering adding a microbrewery on to one of your ﬁrm's *2/2

Câu trả lời đúng

The cane manufacturing machine will result in sales of 2000 canes in

Installation of the machine and the resulting increase in manufacturing

Taggart Transcontinental has a dividend yield of 2.5%. Taggart's equity *2/2

1. $132 received in two years.

2. $160 received in ﬁve years.

3. $200 received in eight years.

4. $220 received in ten years.

Câu trả lời đúng

Câu trả lời đúng

Câu trả lời đúng

Which of the following is NOT a diversiﬁable risk? * 2/2

The risk of a product liability lawsuit

The risk that oil prices rise, increasing production costs

The risk of a key employee being hired away by a competitor

The risk that the CEO is killed in a plane crash

Which of these bonds sells at a discount? * 2/2

Use the information for the question(s) below. *2/2

The Sisyphean Company has a bond outstanding with a face value of

Read all of the following choices. Which one is FALSE? * 2/2

When interest rates rise, bond prices fall

Bond price risk is also called interest rate risk

Bonds are generally riskier assets than ordinary stocks

The Sisyphean Company has a bond outstanding with a face value of

The payback period for this project is closest to:

Câu trả lời đúng

Ignoring the original investment of $5 million, what is THSI's free cash

Câu trả lời đúng

Câu trả lời đúng

NPV=$0; reject project because NPV is $0.

NPV= $67,285.33; accept project because NPV is greater than $0.

NPV= -$28,930.08; reject project because NPV is less than $0.

NPV=$95,216.46; accept project because NPV is greater than $0

Câu trả lời đúng

NPV=$95,216.46; accept project because NPV is greater than $0

Câu trả lời đúng

The Sisyphean Company has a bond outstanding with a face value of

None of the above

Bond X price increases by 18.05%; Bond Y price increases by 13.43%.

Bond X price decreases by 17.97%; Bond Y price decreases by 13.43%.

Bond X price increases by 17.97%; Bond Y price increases by 13.43%.

Bond X price increases by 18.05%; Bond Y price increases by13.59%

Câu trả lời đúng

Bond X price increases by 18.05%; Bond Y price increases by13.59%

You should accept project B since its IRR < 15%.

You should accept project A since its IRR > 15%.

You should reject project B since its NPV > 0.

You should accept project A since its NPV < 0.

Câu trả lời đúng

You should accept project A since its IRR > 15%.

Câu trả lời đúng

The NPV for this project is closest to: * 0/2

Câu trả lời đúng

The risk that oil prices rise, increasing production costs

The risk that the Federal Reserve raises interest rates

The Sisyphean Company has a bond outstanding with a face value of

Câu trả lời đúng

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