Question 1

Dividends are deductible for purposes of calculating a corporation's taxable income.

Accepted Answer

A) True 
 B)False

Question 2

Discuss why more firms are turning to internally generated funds to finance new projects.

Accepted Answer

Many firms have a long-term goal of sust

Question 3

A corporation cannot default on debt that is funded.

Accepted Answer

A) True 
 B)False

Question 4

The system of electing a board of directors where each director is voted on separately is known as:

Accepted Answer

A)  majority voting. 
B)  supermajority voting. 
C)  cumulative voting. 
D)  proxy voting. 
A)  majority voting. 
B)  supermajority voting. 
C)  cumulative voting. 
D)  proxy voting.

Question 5

Corporations are less likely to repurchase callable bonds when market interest rates have risen.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following balance-sheet accounts will be affected when the company buys back some of its outstanding shares?

Accepted Answer

A)  retained earnings 
B)  additional paid-in capital 
C)  treasury shares at cost 
D)  All of the choices are correct 
A)  retained earnings 
B)  additional paid-in capital 
C)  treasury shares at cost 
D)  All of the choices are correct

Question 7

Compare the after-tax rates of return for a Canadian corporate investor from the following two investments: A 20-year,Canadian corporate bond that sells for par and offers a 9 % coupon versus an investment in preferred stock that sells for $40.00 per share and pays a $2.40 dividend.The corporation has a 35 % tax rate.

Accepted Answer

Bond:
9% (1 - .35)= after-tax return
9%

Question 8

What is the net value of common equity for a firm with 3 million shares issued,1 million shares outstanding,$4 million of retained earnings,$2 million of treasury stock at cost,$1 million in additional paid-in capital,and a $1 par value per share?

Accepted Answer

A)  $4 million 
B)  $6 million 
C)  $8 million 
D)  $10 million 
A)  $4 million 
B)  $6 million 
C)  $8 million 
D)  $10 million

Question 9

Since preferred stock dividends are not deductible for tax purposes,few corporations own preferred stock.

Accepted Answer

A) True 
 B)False

Question 10

A warrant has an exercise price of $40,and the current stock price is $38.An investor holding this option will purchase the stock only if:

Accepted Answer

A)  the dividend yield on the stock exceeds 10 %. 
B)  the stock price falls below $38. 
C)  the stock price rises above $40. 
D)  the stock price falls to $20 or below. 
A)  the dividend yield on the stock exceeds 10 %. 
B)  the stock price falls below $38. 
C)  the stock price rises above $40. 
D)  the stock price falls to $20 or below.

Question 11

A shareholder owning 100 shares of stock is voting for the board of directors who are elected by cumulative voting.How many votes did the shareholder cast for Director 'A' if four directors are to be elected and the maximum number of votes was cast for 'A'?

Accepted Answer

A)  25 
B)  100 
C)  200 
D)  400 
A)  25 
B)  100 
C)  200 
D)  400

Question 12

To state that net equity issues have been negative recently in the North America indicates that:

Accepted Answer

A)  more shares have been repurchased than newly issued. 
B)  new shares have been sold at less than par value. 
C)  issuing stock has been a negative NPV transaction. 
D)  dividend payments have exceeded net income. 
A)  more shares have been repurchased than newly issued. 
B)  new shares have been sold at less than par value. 
C)  issuing stock has been a negative NPV transaction. 
D)  dividend payments have exceeded net income.

Question 13

Secured debt is debt that:

Accepted Answer

A)  carries a fixed interest rate. 
B)  is held by a trustee until repayment. 
C)  has more than one year until maturity. 
D)  has specific collateral backing it. 
A)  carries a fixed interest rate. 
B)  is held by a trustee until repayment. 
C)  has more than one year until maturity. 
D)  has specific collateral backing it.

Question 14

The price at which new shares are issued is referred to as the par value of the stock.

Accepted Answer

A) True 
 B)False

Question 15

For Canadian non-financial firms,what source of capital is used the least?

Accepted Answer

A)  debt issues 
B)  internal funds 
C)  net equity issues 
D)  bond issues 
A)  debt issues 
B)  internal funds 
C)  net equity issues 
D)  bond issues

Question 16

What will happen to retained earnings when a corporation issues 1,000 shares of $1 par stock for $10 per share?

Accepted Answer

A)  it will increase by $1,000. 
B)  it will increase by $9,000. 
C)  it will decrease by $9,000. 
D)  it will remain unchanged. 
A)  it will increase by $1,000. 
B)  it will increase by $9,000. 
C)  it will decrease by $9,000. 
D)  it will remain unchanged.

Exam 14: Introduction to Corporate Financing and Governance

Dividends are deductible for purposes of calculating a corporation's taxable income.

Discuss why more firms are turning to internally generated funds to finance new projects.

A corporation cannot default on debt that is funded.

The system of electing a board of directors where each director is voted on separately is known as:

Corporations are less likely to repurchase callable bonds when market interest rates have risen.

Which of the following balance-sheet accounts will be affected when the company buys back some of its outstanding shares?

What is the net value of common equity for a firm with 3 million shares issued,1 million shares outstanding,$4 million of retained earnings,$2 million of treasury stock at cost,$1 million in additional paid-in capital,and a $1 par value per share?

Since preferred stock dividends are not deductible for tax purposes,few corporations own preferred stock.

A warrant has an exercise price of $40,and the current stock price is $38.An investor holding this option will purchase the stock only if:

A shareholder owning 100 shares of stock is voting for the board of directors who are elected by cumulative voting.How many votes did the shareholder cast for Director 'A' if four directors are to be elected and the maximum number of votes was cast for 'A'?

To state that net equity issues have been negative recently in the North America indicates that:

Secured debt is debt that:

The price at which new shares are issued is referred to as the par value of the stock.

For Canadian non-financial firms,what source of capital is used the least?

What will happen to retained earnings when a corporation issues 1,000 shares of $1 par stock for $10 per share?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Venture Capital, IPOs, and Seasoned Offerings

Debt and Payout Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters