BUSI 408 Midterm Qs & As
15) A yield curve of zero coupon False; depends on macroeconomic conditions (e.g., expectation of
bonds is upward sloping. whether short term interest rates will increase or decrease)
False; this is an income statement. Income statement = OVER period of
Balance sheet provides information
time.
about a firm's financial performance
Balance sheet = snapshot of a company's financial position at a specific
over a period of time
point in time
A decrease in accounts receivable False; it adds to FCF in 2015.
from 2014 to 2015 adds to the firm's
free cash flow in 2014.
Depreciation listed in income False; depreciation is NOT a cash flow
statement is a negative cash flow
Given that face values of two bonds False; have an inverse relationship
are the same, the bond with higher
YTM has higher price
, BUSI 408 Midterm Qs & As
Graham and Harvey's survey paper, False; payback rule used more often than discounted
"The Theory and Practice of
Corporate Finance: Evidence from
the Field," shows that the discounted
payback rule is more frequently
used technique than payback rule
If a firm assesses that the value of False; this is amortization
the intangible assets declined over
time, it will reduce the amount listed
on the balance sheet. This is
depreciation
If cash flows from a project are False; if there is just one change of the sign of cash flows, there is a
negative in years 0 and 1, followed unique solution for IRR.
by positive cash flows in years 2
through 6, then there may be
multiple IRR if the cash flow in year 6
is sufficiently large.
If the signs of cash flows change False; there can be 0, 1, or 2 IRRs
twice (e.g. initial period: +,
intermediate period:-, final period: +),
there should be two IRRs.
15) A yield curve of zero coupon False; depends on macroeconomic conditions (e.g., expectation of
bonds is upward sloping. whether short term interest rates will increase or decrease)
False; this is an income statement. Income statement = OVER period of
Balance sheet provides information
time.
about a firm's financial performance
Balance sheet = snapshot of a company's financial position at a specific
over a period of time
point in time
A decrease in accounts receivable False; it adds to FCF in 2015.
from 2014 to 2015 adds to the firm's
free cash flow in 2014.
Depreciation listed in income False; depreciation is NOT a cash flow
statement is a negative cash flow
Given that face values of two bonds False; have an inverse relationship
are the same, the bond with higher
YTM has higher price
, BUSI 408 Midterm Qs & As
Graham and Harvey's survey paper, False; payback rule used more often than discounted
"The Theory and Practice of
Corporate Finance: Evidence from
the Field," shows that the discounted
payback rule is more frequently
used technique than payback rule
If a firm assesses that the value of False; this is amortization
the intangible assets declined over
time, it will reduce the amount listed
on the balance sheet. This is
depreciation
If cash flows from a project are False; if there is just one change of the sign of cash flows, there is a
negative in years 0 and 1, followed unique solution for IRR.
by positive cash flows in years 2
through 6, then there may be
multiple IRR if the cash flow in year 6
is sufficiently large.
If the signs of cash flows change False; there can be 0, 1, or 2 IRRs
twice (e.g. initial period: +,
intermediate period:-, final period: +),
there should be two IRRs.
