FINC 306 FINAL EXAM 2025 |
ACCURATE QUESTIONS & ACTUAL
ANSWERS
If you are doing an NPV analysis and using the WACC as the discount rate, how do you account for
interest paid to bondholders? - correct answer through the cost of debt portion of the WACC
When estimating the WACC, which is the best measure of the firm's cost of debt - correct answer the
YTM for its bonds
When estimating the WACC, which is the best measure of the firm's cost of equity - correct answer the
stock's expected return according to the CAPM
When computing NPV, how do you account for the fact that bond interest is tax deductible? - correct
answer multiply the cost of debt by (1-t)
What does EBIT stand for? - correct answer earnings before interest and taxes
how should you handle an interest payment on debt when computing incremental cash flow? - correct
answer ignore it
how should you handle depreciation when computing incremental cash flow? - correct answer subtract it
just like on an income statement, but add it back after computing taxes
an increase in net working capital represents - correct answer a cash outflow
what is the goal of the financial manager? - correct answer maximize shareholder wealth
which best describes NPV - correct answer the present value of all expected inflows net of the present
value of all expected outflows
, which series of cash flows represents a "normal" project? - correct answer CF0= -100; CF1 = 200; CF3 =
!00; CF4 = 200
all else equal, which will result in a LOWER NPV for a normal project - correct answer higher discount rate
a bonds entire value is typically repaid at maturity - correct answer true
selling a stock is equivalent to selling the rights to all of the stock's future dividends - correct answer true
all else equal, a coupon -paying bond has a greater interest risk than a zero-coupon bond - correct
answer true
if a bonds coupon rate is less than its yield to maturity it sells at premium - correct answer false
if you submit an order through an online broker to purchase 10 shares of zoom, how much money
would zoom receive - correct answer nothing
which of the following is most likely to change during the life of a bond - correct answer yield to maturity
you purchase a stock for $35. At the end of one year, the stock pays a cash dividend of $2. After
receiving the dividend, you sell the stock for $36. On which of the following gains do you owe taxes? -
correct answer both the $1 capital gain and the $2 dividend
suppose a bond sells at a premium to par value. This implies - correct answer the bond has as built in
capital loss.
the typical correlation between two randomly selected US stocks is -1 - correct answer False
People who invest in index funds are acting as if the stock market is not efficient - correct answer false
ACCURATE QUESTIONS & ACTUAL
ANSWERS
If you are doing an NPV analysis and using the WACC as the discount rate, how do you account for
interest paid to bondholders? - correct answer through the cost of debt portion of the WACC
When estimating the WACC, which is the best measure of the firm's cost of debt - correct answer the
YTM for its bonds
When estimating the WACC, which is the best measure of the firm's cost of equity - correct answer the
stock's expected return according to the CAPM
When computing NPV, how do you account for the fact that bond interest is tax deductible? - correct
answer multiply the cost of debt by (1-t)
What does EBIT stand for? - correct answer earnings before interest and taxes
how should you handle an interest payment on debt when computing incremental cash flow? - correct
answer ignore it
how should you handle depreciation when computing incremental cash flow? - correct answer subtract it
just like on an income statement, but add it back after computing taxes
an increase in net working capital represents - correct answer a cash outflow
what is the goal of the financial manager? - correct answer maximize shareholder wealth
which best describes NPV - correct answer the present value of all expected inflows net of the present
value of all expected outflows
, which series of cash flows represents a "normal" project? - correct answer CF0= -100; CF1 = 200; CF3 =
!00; CF4 = 200
all else equal, which will result in a LOWER NPV for a normal project - correct answer higher discount rate
a bonds entire value is typically repaid at maturity - correct answer true
selling a stock is equivalent to selling the rights to all of the stock's future dividends - correct answer true
all else equal, a coupon -paying bond has a greater interest risk than a zero-coupon bond - correct
answer true
if a bonds coupon rate is less than its yield to maturity it sells at premium - correct answer false
if you submit an order through an online broker to purchase 10 shares of zoom, how much money
would zoom receive - correct answer nothing
which of the following is most likely to change during the life of a bond - correct answer yield to maturity
you purchase a stock for $35. At the end of one year, the stock pays a cash dividend of $2. After
receiving the dividend, you sell the stock for $36. On which of the following gains do you owe taxes? -
correct answer both the $1 capital gain and the $2 dividend
suppose a bond sells at a premium to par value. This implies - correct answer the bond has as built in
capital loss.
the typical correlation between two randomly selected US stocks is -1 - correct answer False
People who invest in index funds are acting as if the stock market is not efficient - correct answer false
