MANAGERIAL FINANCE

Managerial Finance

Managerial Finance

10.  The Wet Corp. has an investment project that will reduce expenses by $15,000 per year for 3 years. The project's cost is $20,000, with a 20% CCA rate. Using a 40% tax rate, calculate the net cash flow at the end of year 1? A. $-15,000B. $+11,000C. $+9,000D. $+9,800

16.  In a portfolio, risk is evaluated in a different way than with an individual project. In evaluating portfolio risk we A. need to consider the impact of a given project on the overall risk of the firm.B. recognize that a risky investment may create a portfolio with less risk.C. need to consider how the returns of the projects in the portfolio are correlated.D. all of the other answers are correct.



18.  The lower the coefficient of correlation the greater the A. risk when projects are combined.B. risk reduction when projects are combined.C. return when projects are combined.D. standard deviation when projects are combined.



20 Risk may be integrated into capital budgeting decisions by A. potential loss.B. variability of outcomes around some expected value.C. probability of expected values.D. potential expected loss.



24.  The current spot exchange rate between the Japanese yen and the Canadian dollar is Y 105/$. The yen is expected to appreciate by 5% against the dollar over the next six months. What do you expect the spot exchange rate between the yen and the dollar to be six months from now? A. Y 94.50/$B. Y 99.75/$C. Y 110.25/$D. Y 115.50/$

27.  Which of the following hedging strategies involves a loan without a futures contract? A. eurobond marketB. forward exchange marketC. money marketD. IMM contract

28.  What has motivated Canadian firms to move their operations to foreign countries? A. trade barriers, lower production costs, access to skilled workers, Canadian tax deferralB. trade barriers, lower production costs, access to natural resources and manufacturingC. import tariffs, foreign unions, foreign technology, expropriationD. lower production costs, tax deferral, access to natural resources and manufacturing, expropriation



29.  To minimize exposure to political risk, a multinational firm may establish a joint venture with a local entrepreneur, establish a joint venture with a group of multinationals, or A. purchase an insurance policy from the Export Development Corporation.B. hedge in the Eurodollar market.C. purchase an insurance policy from the Canada Revenue Agency.D. any combination of the other answers



30.  Which of the following factors will not increase the value of a currency in foreign markets? A. high interest ratesB. high inflationC. positive balance of paymentsD. strong stock market rally

31. A 10-year bond pays 8% annual interest (paid semiannually). If similar bonds are currently yielding 5% annually, what is the market value of the bond? A. $1,000.00B. $1,857.40C. $1,233.84D. $1,080.00

32. An issue of common stock has just paid a dividend of $4.50. The dividend growth rate is 10%. What is its price if the market's rate of return is 16%? A. $82.50B. $45.00C. $28.13D. $75.00

33. An issue of common stock is selling for $64.50. The firm just paid a dividend of. $3.08 and dividends are expected to show a constant growth rate of 7%. What is the required rate of return? A. 12.1%B. 10.1%C. 4.1%D. 5.1%

34.  The weighted average cost of capital for Patrick Corp. is currently 10%. Patrick Corp. is considering a new project but must raise new debt to finance the project. Debt represents 25% of the capital ...