UOP FIN 571 Week 5 WileyPLUS Practice Quiz UOP
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<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 <strong>WileyPLUS</strong> <strong>Practice</strong> <strong>Quiz</strong> NEW<br />
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<strong>FIN</strong> <strong>571</strong> <strong>Week</strong> 5 <strong>WileyPLUS</strong> <strong>Practice</strong> <strong>Quiz</strong> NEW<br />
Multiple Choice Question 55<br />
Genaro needs to capture a return of 40 percent for his one-year investment in a property. He believes that he can<br />
sell the property at the end of the year for $150,000 and that the property will provide him with rental income of<br />
$25,000. What is the maximum amount that Genaro should be willing to pay for the property?<br />
$137,500<br />
$125,000<br />
$112,500<br />
$150,000<br />
Multiple Choice Question 54<br />
The process of identifying the bundle of projects that creates the greatest total value and allocating the available<br />
capital to the projects is known as<br />
risk analysis.<br />
rationing.<br />
capital rationing.
udgeting.<br />
Multiple Choice Question 78<br />
Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it<br />
will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the<br />
project is 10 percent, what is the profitability index of the project?<br />
2.09<br />
0.09<br />
1.09<br />
2.18<br />
Multiple Choice Question 89<br />
What might cause a firm to face capital rationing?<br />
If a firm rejects some capital investments that are expected to generate positive NPV’s.<br />
If investors require returns for their capital that are too high.<br />
If a firm has more than one project with a positive NPV.<br />
If a firm has several projects that are expected to generate negative IRR’s.<br />
Multiple Choice Question 59<br />
How firms estimate their cost of capital: The WACC for a firm is 19.75 percent. You know that the firm is financed<br />
with $75 million of equity and $25 million of debt. The cost of debt capital is 7 percent. What is the cost of equity<br />
for the firm?<br />
19.75%<br />
32.50%<br />
24.00%<br />
58.00%<br />
Multiple Choice Question 61
The cost of debt: Bellamee, Inc., has semiannual bonds outstanding with five years to maturity and are priced at<br />
$920.87. If the bonds have a coupon rate of 7 percent, then what is the YTM for the bonds?<br />
4.5%<br />
9.0%<br />
7.0%<br />
9.2%<br />
Multiple Choice Question 63<br />
The cost of debt: Beckham Corporation has semiannual bonds outstanding with 13 years to maturity and are<br />
currently priced at $746.16. If the bonds have a coupon rate of 8.5 percent, then what is the after-tax cost of debt<br />
for Beckham if its marginal tax rate is 35%? Assume that your calculation is made as on Wall Street<br />
8.125%<br />
12.890%<br />
6.250%<br />
12.500%<br />
Multiple Choice Question 67<br />
The cost of equity: RadicalVenOil, Inc., has a cost of equity capital equal to 22.8 percent. If the risk-free rate of<br />
return is 10 percent and the expected return on the market is 18 percent, then what is the firm's beta if the firm's<br />
marginal tax rate is 35 percent?<br />
4.10<br />
1.0<br />
1.28<br />
1.60<br />
Multiple Choice Question 83<br />
Which type of project do financial managers typically use the highest cost of capital when evaluating?<br />
New product projects
Efficiency projects<br />
Market expansion projects<br />
Extension projects
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