FINC 341 Final Exam Theory UPDATED ACTUAL Questions And Correct
Answers
Terms in this set (125)
T/F: EVA considers the cost of debt AND the cost of T
equity
T/F: EVA is highly correlated with stock price T
T/F: EVA is good for measuring management T
performance in specific divisions
T/F: MVA is good for measuring management F
performance in specific divisions
Old Dividend Exclusion Rules 70/80/100
New Dividend Exclusion Rules 50/65/100
T/F: The higher the tax bracket an individual is in, the T
more attractive municipal bonds are
T/F: Dividend income received by individuals used to be T
taxed as ordinary income
T/F: You can reduce annual ordinary income by 3000 T
when dealing with capital losses
If debt ratio increases, EM _____________________ increases
T/F: If a firm maximizes ROE, it's quite probable it has T
taken on too much debt
T/F: Firms have learned that using ROE for bonuses can T
be problematic, and are increasingly turning to EVA to
determine bonuses
T/F: A number of companies use ROE to determine T
executives' bonuses, but it can entice an executive to turn
down a project that is profitable but brings down the
average ROE for the year
T/F: When two projects of different size/investment are F
compared using ROE, the one with the lower ROE adds
less value ($) to the firm than the other one
T/F: A firm's ROA can equal its ROE only if the firm has no T
debt in its capital structure
, DR = 1-(1/EM)
EM = 1/(1-DR)
T/F: A benefit of focusing on ROE is that it ensures that all F
profitable projects will be accepted so that the average
ROE of the firm will be boosted
T/F: Since ROE is an important measure of performance, F
financial managers should try to maximize the company's
ROE
T/F: EVA is different for Net Income because EVA reflects T
the cost of equity as well as the cost of debt
T/F: When two mutually exclusive projects are being F
considered, the one with the higher ROE should be
chosen, regardless of the project size
T/F: A firm's EPS is highly correlated with its stock price F
T/F: While the NASDAQ trades more dollar volume than F
the NYSE, the NYSE has a higher share volume traded
than the NASDAQ
T/F: While the NASDAQ trades less dollar volume than T
the NYSE, the NYSE has a lower share volume traded
than the NASDAQ
T/F: In 1972, 68 brokers created the NYSE Board under F
the Buttonwood Agreement
T/F: In 1972, 24 brokers created the NYSE Board under T
the Buttonwood Agreement
T/F: In a dutch auction, stocks are sold at the highest bid T
price that would sell all of the shares in the offering
T/F: When a company puts out a bond issue and then two F
years later puts out another bond issue, the second bond
issue is being sold on the secondary market
T/F: A dealer's profit is the bid-ask spread, and this spread F
generally becomes larger when the stock is traded more
often
T/F: The Federal Reserve typically lowers interest rates T
during recessions to stimulate the economy
Answers
Terms in this set (125)
T/F: EVA considers the cost of debt AND the cost of T
equity
T/F: EVA is highly correlated with stock price T
T/F: EVA is good for measuring management T
performance in specific divisions
T/F: MVA is good for measuring management F
performance in specific divisions
Old Dividend Exclusion Rules 70/80/100
New Dividend Exclusion Rules 50/65/100
T/F: The higher the tax bracket an individual is in, the T
more attractive municipal bonds are
T/F: Dividend income received by individuals used to be T
taxed as ordinary income
T/F: You can reduce annual ordinary income by 3000 T
when dealing with capital losses
If debt ratio increases, EM _____________________ increases
T/F: If a firm maximizes ROE, it's quite probable it has T
taken on too much debt
T/F: Firms have learned that using ROE for bonuses can T
be problematic, and are increasingly turning to EVA to
determine bonuses
T/F: A number of companies use ROE to determine T
executives' bonuses, but it can entice an executive to turn
down a project that is profitable but brings down the
average ROE for the year
T/F: When two projects of different size/investment are F
compared using ROE, the one with the lower ROE adds
less value ($) to the firm than the other one
T/F: A firm's ROA can equal its ROE only if the firm has no T
debt in its capital structure
, DR = 1-(1/EM)
EM = 1/(1-DR)
T/F: A benefit of focusing on ROE is that it ensures that all F
profitable projects will be accepted so that the average
ROE of the firm will be boosted
T/F: Since ROE is an important measure of performance, F
financial managers should try to maximize the company's
ROE
T/F: EVA is different for Net Income because EVA reflects T
the cost of equity as well as the cost of debt
T/F: When two mutually exclusive projects are being F
considered, the one with the higher ROE should be
chosen, regardless of the project size
T/F: A firm's EPS is highly correlated with its stock price F
T/F: While the NASDAQ trades more dollar volume than F
the NYSE, the NYSE has a higher share volume traded
than the NASDAQ
T/F: While the NASDAQ trades less dollar volume than T
the NYSE, the NYSE has a lower share volume traded
than the NASDAQ
T/F: In 1972, 68 brokers created the NYSE Board under F
the Buttonwood Agreement
T/F: In 1972, 24 brokers created the NYSE Board under T
the Buttonwood Agreement
T/F: In a dutch auction, stocks are sold at the highest bid T
price that would sell all of the shares in the offering
T/F: When a company puts out a bond issue and then two F
years later puts out another bond issue, the second bond
issue is being sold on the secondary market
T/F: A dealer's profit is the bid-ask spread, and this spread F
generally becomes larger when the stock is traded more
often
T/F: The Federal Reserve typically lowers interest rates T
during recessions to stimulate the economy
