UB MGF 401 - MGF301_Test_2_-_Fall_2009_Test_Version_I (7 pages)

Previewing pages 1, 2 of 7 page document View the full content.
View Full Document

MGF301_Test_2_-_Fall_2009_Test_Version_I



Previewing pages 1, 2 of actual document.

View the full content.
View Full Document
View Full Document

MGF301_Test_2_-_Fall_2009_Test_Version_I

225 views


Pages:
7
School:
University at Buffalo, The State University of New York
Course:
Mgf 401 - Financial Institutions

Unformatted text preview:

Name Student Number TEST 2 MGF 301 Corporation Finance Fall 2009 Please sign name in box Please tear off the answer sheet and answer all of the following questions on the answer sheet Note Total Points 100 Multiple Choice 4 points each unless otherwise indicated 1 The following arise out of a new project implemented by YT Inc Which of the following does not represent a cash flow that should be taken into account for capital budgeting purposes a An increase in required inventory levels b A decrease in income taxes paid to the government c Electricity costs to run the new machinery for the project d All of the above should be taken into account 2 Anthony has earned actual returns of 3 12 and 6 the last three years on an investment he made three years ago According to finance theory we discussed in class which of the following must be true about the expected return on this investment a E r Rf b E r Rf c E r Rf d E r 0 3 You currently own only a single stock that has 5 If you form a portfolio by buying another stock with 5 are you reducing the expected level of market risk in your portfolio a No because the portfolio still has a 5 b No because all stocks have risk and you can only reduce risk by adding a bond c Yes because the second stock will cancel out some of the variation in the first stock d Yes because the portfolio will now have a 25 4 Mark each statement about capital budgeting as true or false 2 points each a If your forecast of cash flows is not precise you should reduce your cash flow estimates so that they are conservative estimates b The time value of money is included in the IRR analysis by discounting future cash flows to the present c The Payback method ignores cash flows after the required payback period d To find the IRR you must first know the discount rate 5 If markets follow the strong form of efficient market theory which is not true a market prices should quickly reflect all private and public information b stock prices will only increase when



View Full Document

Access the best Study Guides, Lecture Notes and Practice Exams

Loading Unlocking...
Login

Join to view MGF301_Test_2_-_Fall_2009_Test_Version_I and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view MGF301_Test_2_-_Fall_2009_Test_Version_I and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?