高顿教育——IMA协会官方授权培训机构
CMA（P2）——Corporate Finance
The next 4 questions are based on the following information. Techspace has been a successful stock over the past few years despite its riskiness. The state of the economy has a tremendous effect on the expected returns for Techspace as shown below:
B.1.1. What is the expected rate of return on Techspace stock?
A. 7.5%
B. 15%
C. 35%
D. 25%
B.1.2. The standard deviation of Techspace returns is
A. 7.5
B. 17.35
C. 3.01
D. 1.0
B.1.3. The total weighted squared variance of Techspace returns is
A. 43
B. 301
C. 75
D. 2738
B.1.4. The coefficient of variation of Techspace returns is
A. -1.0
B. 1.0
C. 1.3
D. 2.31
B.1.5. The systematic risk of an individual security is measured by the
A. standard deviation of the security’s rate of return.
B. covariance between the security’s returns and the general market.
C. security’s contribution to the portfolio risk.
D. standard deviation of the security’s returns and other similar securities.
B.1.6. Which one of the following would have the least impact on a firm’s beta value?
A. Debt-to-equity ratio.
B. Industry characteristics.
C. Operating leverage.
D. Payout ratio.
B.3.1. One reason that a financial manager may prefer to issue preferred stock rather than debt is because:
A. The cost of fixed debt is less expensive since it is tax-deductible even if a sinking fund is required to retire the debt
B. The preferred dividend is often cumulative, whereas interest payments are not
C. Payments to preferred stockholders are not considered fixed payments
D. In a legal sense, preferred stock is equity; therefore, dividend payments are not legal obligations
B.3.2. A company has recently purchased some stock of a competitor as part of a long-term plan to acquire the competitor. However, it is somewhat concerned that the market price of this stock could decrease over the short run. The company could hedge against the possible decline in the stock’s market price by
A. Purchasing a call option on that stock
B. Purchasing a put option on that stock
C. Selling a put option on that stock
D. Obtaining a warrant option on that stock
B.3.3. Which one of the following statements concerning debt instruments is correct?
A. The coupon rate and yield of an outstanding long-term bond will change over time as economic factors change.
B. A 25-year bond with a coupon rate of 9% and one year to maturity has more interest rate risk than a 10-year bond with a 9% coupon issued by the same firm with one year to maturity.
C. For long-term bonds, price sensitivity to a given change in interest rates is greater the longer the maturity of the bond.
D. A bond with one year to maturity would have more interest rate risk than a bond with 15 years to maturity.
B.3.4. Frasier Products has been growing at a rate of 10% per year and expects this growth to continue and produce earnings per share of $4.00 next year. The firm has a dividend payout ratio of 35% and a beta value of 1.25. If the risk-free rate is 7% and the return on the market is 15%, what is the expected current market value of Frasier’s common stock?
A. $14.00.
B. $16.00.
C. $20.00.
D. $28.00.
B.4.1. Joint Products Inc., a corporation with a 40% marginal tax rate, plans to issue $1,000,000 of 8% preferred stock in exchange for $1,000,000 of its 8% bonds currently outstanding. The firm’s total liabilities and equity are equal to $10,000,000. The effect of this exchange on the firm’s weighted average cost of capital is likely to be
A. no change, since it involves equal amounts of capital in the exchange and both instruments have the same rate.
B. a decrease, since a portion of the debt payments are tax deductible.
C. a decrease, since preferred stock payments do not need to be made each year, whereas debt payments must be made.
D. an increase, since a portion of the debt payments are tax deductible.
B.4.2. Which of the following, when considered individually, would generally have the effect of increasing a firm’s cost of capital?
I. The firm reduces its operating leverage.
II. The corporate tax rate is increased.
III. The firm pays off its only outstanding debt.
IV. The Treasury Bond yield increases.
A. A. I and III.
B. B. II and IV.
C. C. III and IV.
D. D. I, III and IV.
B.5.1. Odyssey Toys is a retailer operating in several cities. The individual store managers deposit daily collections at a local bank in a non-bearing checking account. Twice per week, the local bank issues a depository transfer check (DTC) to the central bank at headquarters. The controller of the company is considering using a wire transfer. The additional cost of each transfer would be $25; collection would be accelerated by 2 days; and the annual interest rate paid by the central bank is 7.2%. At what amount of dollars transferred would it be economically feasible to use a wire transfer instead of the DTC? Assume a 360-day year
A. It would never be economically feasible
B. $125,000 or above
C. Any amount greater than $173
D. Any amount greater than $62,500
B.5.2. Some managers express the opinion that their cash management problems are nothing more than inventory problems. They then proceed to use cash management models, such as the EOQ model, to determine the:
A. Credit and collection policies
B. Marketable securities level
C. Proper relationship between current assets and current liabilities
D. Proper blend of marketable securities and cash
B.5.3. A consultant recommends that a company hold funds for the following two reasons:
Ÿ Reason #1: cash needs can fluctuate substantially throughout the year
Ÿ Reason #2: opportunities for buying at a discount may appear during the year
The cash balances used to address the reasons given above are correctly classified as
B.6.1. James Hemming, the chief financial officer of a midwestern machine parts manufacturer, is considering splitting the company’s stock, which is currently selling at $80.00 per share. The stock currently pays a $1.00 per share dividend. If the split is two-for-one, Mr. Hemming may expect the post split price to be
A. exactly $40.00, regardless of dividend policy.
B. greater than $40.00, if the dividend is changed to $0.45 per new share.
C. greater than $40.00, if the dividend is changed to $0.55 per new share.
D. less than $40.00, regardless of dividend policy.
B.8.1. Country R’s currency would tend to depreciate relative to Country T’s currency when
A. Country R switches to a more restrictive monetary policy.
B. Country T has a rapid rate of growth in income that causes imports to lag behind exports.
C. Country R has a rate of inflation that is lower than the rate of inflation in Country T.
D. Country R has real interest rates that are lower than real interest rates in Country T.
B.8.2. One U.S. dollar is being quoted at 120 Japanese yen on the spot market and at 123 Japanese yen on the 90-day forward market; hence, the annual effect in the forward market is that the
A. U.S. dollar is at a premium of 10%.
B. U.S. dollar is at a premium of 2.5%.
C. U.S. dollar is at a discount of 10%.
D. U.S. dollar is at a premium of 0.025%.
B.8.3. The Robo Division, a decentralized division of GMT Industries, has been approached to submit a bid for a potential project for the RSP Company. Robo Division has been informed by RSP that they will not consider bids over $8,000,000. Robo Division purchases its materials from the Cross Division of GMT Industries. There would be no additional fixed costs for either the Robo or Cross Divisions. Information regarding this project is as follows.
If Robo Division submits a bid for $8,000,000, the amount of contribution margin recognized by the Robo Division and GMT Industries, respectively, is
A. $(500,000) and $(2,000,000).
B. $3,200,000 and $(500,000).
C. $(500,000) and $1,700,000.
D. $3,200,000 and $1,700.000.
B.8.4. The Robo Division, a decentralized division of GMT Industries, has been approached to submit a bid for a potential project for the RSP Company. Robo Division has been informed by RSP that they will not consider bids over $8,000,000. Robo Division purchases its materials from the Cross Division of GMT Industries. There would be no additional fixed costs for either the Robo or Cross Divisions. Information regarding this project is as follows.
If Robo Division submits a bid for $8,000,000, the amount of contribution margin recognized by the Robo Division and GMT Industries, respectively, is
A. $(500,000) and $(2,000,000).
B. $3,200,000 and $(500,000).
C. $(500,000) and $1,700,000.
D. $3,200,000 and $1,700.000.
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| State of the economy | Probability | Returns | ||
| Depression | 5% | -45% | ||
| Recession | 15% | -10% | ||
| Minimal slowdown | 20% | 5% | ||
| Stable | 40% | 10% | ||
| Expansion | 15% | 30% | ||
| Significant expansion | 5% | 35% |
A. 7.5%
B. 15%
C. 35%
D. 25%
B.1.2. The standard deviation of Techspace returns is
A. 7.5
B. 17.35
C. 3.01
D. 1.0
B.1.3. The total weighted squared variance of Techspace returns is
A. 43
B. 301
C. 75
D. 2738
B.1.4. The coefficient of variation of Techspace returns is
A. -1.0
B. 1.0
C. 1.3
D. 2.31
B.1.5. The systematic risk of an individual security is measured by the
A. standard deviation of the security’s rate of return.
B. covariance between the security’s returns and the general market.
C. security’s contribution to the portfolio risk.
D. standard deviation of the security’s returns and other similar securities.
B.1.6. Which one of the following would have the least impact on a firm’s beta value?
A. Debt-to-equity ratio.
B. Industry characteristics.
C. Operating leverage.
D. Payout ratio.
B.3.1. One reason that a financial manager may prefer to issue preferred stock rather than debt is because:
A. The cost of fixed debt is less expensive since it is tax-deductible even if a sinking fund is required to retire the debt
B. The preferred dividend is often cumulative, whereas interest payments are not
C. Payments to preferred stockholders are not considered fixed payments
D. In a legal sense, preferred stock is equity; therefore, dividend payments are not legal obligations
B.3.2. A company has recently purchased some stock of a competitor as part of a long-term plan to acquire the competitor. However, it is somewhat concerned that the market price of this stock could decrease over the short run. The company could hedge against the possible decline in the stock’s market price by
A. Purchasing a call option on that stock
B. Purchasing a put option on that stock
C. Selling a put option on that stock
D. Obtaining a warrant option on that stock
B.3.3. Which one of the following statements concerning debt instruments is correct?
A. The coupon rate and yield of an outstanding long-term bond will change over time as economic factors change.
B. A 25-year bond with a coupon rate of 9% and one year to maturity has more interest rate risk than a 10-year bond with a 9% coupon issued by the same firm with one year to maturity.
C. For long-term bonds, price sensitivity to a given change in interest rates is greater the longer the maturity of the bond.
D. A bond with one year to maturity would have more interest rate risk than a bond with 15 years to maturity.
B.3.4. Frasier Products has been growing at a rate of 10% per year and expects this growth to continue and produce earnings per share of $4.00 next year. The firm has a dividend payout ratio of 35% and a beta value of 1.25. If the risk-free rate is 7% and the return on the market is 15%, what is the expected current market value of Frasier’s common stock?
A. $14.00.
B. $16.00.
C. $20.00.
D. $28.00.
B.4.1. Joint Products Inc., a corporation with a 40% marginal tax rate, plans to issue $1,000,000 of 8% preferred stock in exchange for $1,000,000 of its 8% bonds currently outstanding. The firm’s total liabilities and equity are equal to $10,000,000. The effect of this exchange on the firm’s weighted average cost of capital is likely to be
A. no change, since it involves equal amounts of capital in the exchange and both instruments have the same rate.
B. a decrease, since a portion of the debt payments are tax deductible.
C. a decrease, since preferred stock payments do not need to be made each year, whereas debt payments must be made.
D. an increase, since a portion of the debt payments are tax deductible.
B.4.2. Which of the following, when considered individually, would generally have the effect of increasing a firm’s cost of capital?
I. The firm reduces its operating leverage.
II. The corporate tax rate is increased.
III. The firm pays off its only outstanding debt.
IV. The Treasury Bond yield increases.
A. A. I and III.
B. B. II and IV.
C. C. III and IV.
D. D. I, III and IV.
B.5.1. Odyssey Toys is a retailer operating in several cities. The individual store managers deposit daily collections at a local bank in a non-bearing checking account. Twice per week, the local bank issues a depository transfer check (DTC) to the central bank at headquarters. The controller of the company is considering using a wire transfer. The additional cost of each transfer would be $25; collection would be accelerated by 2 days; and the annual interest rate paid by the central bank is 7.2%. At what amount of dollars transferred would it be economically feasible to use a wire transfer instead of the DTC? Assume a 360-day year
A. It would never be economically feasible
B. $125,000 or above
C. Any amount greater than $173
D. Any amount greater than $62,500
B.5.2. Some managers express the opinion that their cash management problems are nothing more than inventory problems. They then proceed to use cash management models, such as the EOQ model, to determine the:
A. Credit and collection policies
B. Marketable securities level
C. Proper relationship between current assets and current liabilities
D. Proper blend of marketable securities and cash
B.5.3. A consultant recommends that a company hold funds for the following two reasons:
Ÿ Reason #1: cash needs can fluctuate substantially throughout the year
Ÿ Reason #2: opportunities for buying at a discount may appear during the year
The cash balances used to address the reasons given above are correctly classified as
| Reason #1 | Reason #2 | ||
| A. | Speculative balances | Speculative balances | |
| B. | Speculative balances | Precautionary balances | |
| C. | Precautionary balances | Speculative balances | |
| D. | Precautionary balances | Precautionary balances |
B.6.1. James Hemming, the chief financial officer of a midwestern machine parts manufacturer, is considering splitting the company’s stock, which is currently selling at $80.00 per share. The stock currently pays a $1.00 per share dividend. If the split is two-for-one, Mr. Hemming may expect the post split price to be
A. exactly $40.00, regardless of dividend policy.
B. greater than $40.00, if the dividend is changed to $0.45 per new share.
C. greater than $40.00, if the dividend is changed to $0.55 per new share.
D. less than $40.00, regardless of dividend policy.
B.8.1. Country R’s currency would tend to depreciate relative to Country T’s currency when
A. Country R switches to a more restrictive monetary policy.
B. Country T has a rapid rate of growth in income that causes imports to lag behind exports.
C. Country R has a rate of inflation that is lower than the rate of inflation in Country T.
D. Country R has real interest rates that are lower than real interest rates in Country T.
B.8.2. One U.S. dollar is being quoted at 120 Japanese yen on the spot market and at 123 Japanese yen on the 90-day forward market; hence, the annual effect in the forward market is that the
A. U.S. dollar is at a premium of 10%.
B. U.S. dollar is at a premium of 2.5%.
C. U.S. dollar is at a discount of 10%.
D. U.S. dollar is at a premium of 0.025%.
B.8.3. The Robo Division, a decentralized division of GMT Industries, has been approached to submit a bid for a potential project for the RSP Company. Robo Division has been informed by RSP that they will not consider bids over $8,000,000. Robo Division purchases its materials from the Cross Division of GMT Industries. There would be no additional fixed costs for either the Robo or Cross Divisions. Information regarding this project is as follows.
| Cross Division | Robo Division | |
| Variable Costs | $1,500,000 | $4,800,000 |
| Transfer Price | $3,700,000 |
A. $(500,000) and $(2,000,000).
B. $3,200,000 and $(500,000).
C. $(500,000) and $1,700,000.
D. $3,200,000 and $1,700.000.
B.8.4. The Robo Division, a decentralized division of GMT Industries, has been approached to submit a bid for a potential project for the RSP Company. Robo Division has been informed by RSP that they will not consider bids over $8,000,000. Robo Division purchases its materials from the Cross Division of GMT Industries. There would be no additional fixed costs for either the Robo or Cross Divisions. Information regarding this project is as follows.
| Cross division | Robo division | ||
| Variable costs | $1,500,000 | $4,800,000 | |
| Transfer price | $3,700,000 | - |
A. $(500,000) and $(2,000,000).
B. $3,200,000 and $(500,000).
C. $(500,000) and $1,700,000.
D. $3,200,000 and $1,700.000.
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