FNAN 522 Final EXAM QUESTIONS
WITH CORRECT ANSWERS||100%
GUARANTEED PASS||A+
GRADED!!||<<LATEST VERSION>>
Which of the following regarding the possible financial impacts of leverage of a
company is correct?
Select one:
a. Leverage increases risk, which decreases a stock's value.
b. Involuntary leverage is typically caused by eroding equity value, not additional
debt.
c. All of these answers.
d. At an ideal level of financial leverage, a company's return on equity decreases. -
ANSWER ✓ b. Involuntary leverage is typically caused by eroding equity value,
not additional debt.
Which of the following statements regarding the cost of capital and its effect on
capital structure and investment choices is correct?
a. All of these answers.
b. For an investment to be worthwhile, the expected return must be greater than the
cost of capital.
c. Because of tax advantages, it is cheaper to issue new equity than debt.
d. Adding debt does not increase a company's interest rate. - ANSWER ✓ b. For an
investment to be worthwhile, the expected return must be greater than the cost of
capital.
Which of the following statements regarding the use of the pecking order theory is
true?
Select one:
a. All of these answers.
b. Some academics have demonstrated that pecking theory fails when applied to
some firms.
c. In pecking theory, internal financing is superior to debt which is superior to
selling more equity.
, d. The pecking order theory argues that when a company sells its shares, that is a
negative signal. - ANSWER ✓ a. All of these answers.
A company wants to implement a capital growth policy. In the current year it had
$20 million in net income. How much income should it distribute in dividends in
order to pursue this strategy?
a. $19 million
b. $30 million
c. $20
d. $1 million - ANSWER ✓ d. $1 million
Under the Modigliani-Miller theorem in finance, the value of a company depends
on:
a. the relative mix of stock returns and dividends.
b. the capital structure of the company.
c. the competitive situation of the company and the projects that the company
undertakes and plans.
d. how managers work together - ANSWER ✓ c. the competitive situation of the
company and the projects that the company undertakes and plans.
Which of the following changes after a stock splits?
a. The stock's per share price.
b. The stockholder's ownership percentage in
the company.
c. The company's total market value.
d. All of these answers. - ANSWER ✓ a. The stock's per share price.
Which of the following is a possible market reaction to an stock repurchase
announcement?
a. All of these answers.
b. The stock price may increase because the repurchase signals that the company
views the shares as currently undervalued.
c. The stock price may fall because the repurchase signals that the company's
future earnings may not be as high as the market currently expects.
WITH CORRECT ANSWERS||100%
GUARANTEED PASS||A+
GRADED!!||<<LATEST VERSION>>
Which of the following regarding the possible financial impacts of leverage of a
company is correct?
Select one:
a. Leverage increases risk, which decreases a stock's value.
b. Involuntary leverage is typically caused by eroding equity value, not additional
debt.
c. All of these answers.
d. At an ideal level of financial leverage, a company's return on equity decreases. -
ANSWER ✓ b. Involuntary leverage is typically caused by eroding equity value,
not additional debt.
Which of the following statements regarding the cost of capital and its effect on
capital structure and investment choices is correct?
a. All of these answers.
b. For an investment to be worthwhile, the expected return must be greater than the
cost of capital.
c. Because of tax advantages, it is cheaper to issue new equity than debt.
d. Adding debt does not increase a company's interest rate. - ANSWER ✓ b. For an
investment to be worthwhile, the expected return must be greater than the cost of
capital.
Which of the following statements regarding the use of the pecking order theory is
true?
Select one:
a. All of these answers.
b. Some academics have demonstrated that pecking theory fails when applied to
some firms.
c. In pecking theory, internal financing is superior to debt which is superior to
selling more equity.
, d. The pecking order theory argues that when a company sells its shares, that is a
negative signal. - ANSWER ✓ a. All of these answers.
A company wants to implement a capital growth policy. In the current year it had
$20 million in net income. How much income should it distribute in dividends in
order to pursue this strategy?
a. $19 million
b. $30 million
c. $20
d. $1 million - ANSWER ✓ d. $1 million
Under the Modigliani-Miller theorem in finance, the value of a company depends
on:
a. the relative mix of stock returns and dividends.
b. the capital structure of the company.
c. the competitive situation of the company and the projects that the company
undertakes and plans.
d. how managers work together - ANSWER ✓ c. the competitive situation of the
company and the projects that the company undertakes and plans.
Which of the following changes after a stock splits?
a. The stock's per share price.
b. The stockholder's ownership percentage in
the company.
c. The company's total market value.
d. All of these answers. - ANSWER ✓ a. The stock's per share price.
Which of the following is a possible market reaction to an stock repurchase
announcement?
a. All of these answers.
b. The stock price may increase because the repurchase signals that the company
views the shares as currently undervalued.
c. The stock price may fall because the repurchase signals that the company's
future earnings may not be as high as the market currently expects.
