Whether real seignorage revenue increases when the rate of money growth increases depends on whether

Whether real seignorage revenue increases when the rate of money growth increases depends on whether a. the rise in the real supply of currency outweighs...

Consider an economy that has the following monetary data.

Consider an economy that has the following monetary data. Currency held by the nonbank public = $300 Bank reserves = $50 Monetary base = $350 Deposits...

Consider an economy that has the following monetary data.

Consider an economy that has the following monetary data. Currency held by the nonbank public = $300 Bank reserves = $50 Monetary base = $350 Deposits...

Real money demand in the economy is given by L = 0.5Y - 2500i, where Y is real income and i is the nominal interest rate. In equilibrium, real money demand L equals real money supply M/P. Suppose that Y equals 1000 and the real interest rate is 0.02. What is the maximum amount of seignorage revenue?

Real money demand in the economy is given byL = 0.5Y - 2500i,where Y is real income and i is the nominal interest rate. In equilibrium, real money demand...

Real money demand in the economy is given by L = 0.5Y - 2500i, where Y is real income and i is the nominal interest rate. In equilibrium, real money demand L equals real money supply M/P. Suppose that Y equals 1000 and the real interest rate is 0.02. At what rate of inflation is seignorage maximized?

Real money demand in the economy is given byL = 0.5Y - 2500i,where Y is real income and i is the nominal interest rate. In equilibrium, real money demand...

Assume that in an all-currency economy the real interest rate is 4%, the expected rate of inflation is 8%, and the nominal interest rate is 12%. The real monetary base equals $50 billion. The real seignorage revenue collected by the government would equal

Assume that in an all-currency economy the real interest rate is 4%, the expected rate of inflation is 8%, and the nominal interest rate is 12%. The...

The real seigniorage collected by the government in an all-currency economy is the product of

The real seigniorage collected by the government in an all-currency economy is the product of a. the debt/GDP ratio and the rate of inflation. b....

In an all-currency economy in which real output and the real interest rate are fixed and the rates of money growth and inflation are constant, the inflation rate equals

In an all-currency economy in which real output and the real interest rate are fixed and the rates of money growth and inflation are constant, the inflation...

State governments in the United States can raise revenue by all the following means except

State governments in the United States can raise revenue by all the following means except a. increasing the money supply. b. increasing sales taxes. c....

In which case would you be most likely to expect inflation to occur?

In which case would you be most likely to expect inflation to occur? a. The government runs a sustained government deficit by increasing purchases. b....

The relationship between the government deficit and the change in the monetary base is

The relationship between the government deficit and the change in the monetary base is a. deficit equals change in government debt held by the public...

Seigniorage is the revenue a government raises by

Seigniorage is the revenue a government raises by a. borrowing money. b. charging fees for services. c. taxation. d. printing money. Answer:...

Deficits are a burden on future generations if they

Deficits are a burden on future generations if they  a. are always a primary government deficit. b. are not used for government capital formation. c....

According to the Ricardian equivalence proposition, current deficits

According to the Ricardian equivalence proposition, current deficits a. will affect both consumption and national saving. b. will not affect consumption...

A decreased government deficit created by a lump-sum tax increase will increase national saving if

A decreased government deficit created by a lump-sum tax increase will increase national saving if a. the real interest rate is less than the growth...

If the deficit is 0.02 times GDP, the existing debt/GDP ratio is 0.5, and the growth rate of nominal GDP is 0.03, then the change in the debt-GDP ratio is

If the deficit is 0.02 times GDP, the existing debt/GDP ratio is 0.5, and the growth rate of nominal GDP is 0.03, then the change in the debt-GDP ratio...

Increases in the debt-GDP ratio are primarily caused by

Increases in the debt-GDP ratio are primarily caused by a. a high government deficit relative to GDP. b. a high growth rate of GDP. c. increases in...

The total value of government bonds outstanding at any particular time is called the

The total value of government bonds outstanding at any particular time is called the a. government debt. b. seignorage revenue. c. yield curve. d....

The average cost of the distortion created by taxes

The average cost of the distortion created by taxes a. increases proportionately with the tax rate. b. is higher when the tax rate is constant than...

Assume that the lost output due to tax distortions is proportional to the square of the tax rate. If the average cost of the distortion created by taxes is currently $1000, and the tax rate is increased from 40% to 50%, the average cost of the distortion created by taxes will increase to

Assume that the lost output due to tax distortions is proportional to the square of the tax rate. If the average cost of the distortion created by taxes...

Taxes distort economic behavior because they

Taxes distort economic behavior because they a. change the composition of income and spending. b. change the composition of consumption, investment,...

Suppose that all workers place a value on their leisure of 40 goods per day. The production function relating output per day Y to the number of people working per day N is

Suppose that all workers place a value on their leisure of 40 goods per day. The production function relating output per day Y to the number of people...

Suppose that all workers place a value on their leisure of 40 goods per day. The production function relating output per day Y to the number of people working per day N is

Suppose that all workers place a value on their leisure of 40 goods per day. The production function relating output per day Y to the number of people...

A decrease in the average tax rate, with the marginal tax rate held constant, will

A decrease in the average tax rate, with the marginal tax rate held constant, will a. not affect the amount of labor supplied at any real wage. b....

An increase in the marginal tax rate, with the average tax rate held constant, will

An increase in the marginal tax rate, with the average tax rate held constant, will a. increase the amount of labor supplied at any real wage. b....

The marginal tax rate is

The marginal tax rate is a. the total amount of taxes paid divided by after-tax income. b. the fraction of an additional dollar of income that must...

The total amount of taxes paid divided by before-tax income is the

The total amount of taxes paid divided by before-tax income is the a. rate of hysteresis. b. median taxpayer rate. c. average tax rate. d. marginal...

All of the following can be government capital EXCEPT

All of the following can be government capital EXCEPT a. mass-transit systems. b. Treasury securities. c. roads. d. schools. Answer:...

Government capital consists of

Government capital consists of a. money owned by the government. b. securities owned by the government. c. long-lived physical assets owned by the...

The amount the government budget deficit would be if the economy were at full employment is known as the

The amount the government budget deficit would be if the economy were at full employment is known as the a. primary deficit. b. natural deficit. c....

Because of automatic stabilizers, in recessions the government budget deficit ________, while in expansions the deficit ________.

Because of automatic stabilizers, in recessions the government budget deficit ________, while in expansions the deficit ________. a. rises; rises b....

Which of the following would not act as an automatic stabilizer?

Which of the following would not act as an automatic stabilizer? a. Government purchases b. Unemployment insurance c. Corporate income taxes d. Personal...

Provisions in the budget that cause government spending to rise or taxes to fall without legislation when GDP falls are known as

Provisions in the budget that cause government spending to rise or taxes to fall without legislation when GDP falls are known as  a. automatic...

The political process by which fiscal policy is made

The political process by which fiscal policy is made a. is relatively rapid, contributing to the effectiveness of fiscal policy. b. is efficient...

Classical economists think that lump-sum tax changes

Classical economists think that lump-sum tax changes a. should be used to smooth business cycles. b. have no effect because of Ricardian equivalence. c....

The current deficit minus net interest is called the

The current deficit minus net interest is called the a. primary deficit. b. current surplus. c. net current deficit. d. primary current deficit. Answer:...

The primary current deficit is

The primary current deficit is a. current expenditures - net interest - tax revenues. b. current expenditures + transfers - tax revenues. c. current...

The current deficit is

The current deficit is a. outlays minus tax revenues. b. the deficit minus depreciation. c. the deficit plus net interest payments. d. current expenditures...

The current deficit is

The current deficit is a. the deficit plus net interest payments. b. the deficit minus government investment. c. the deficit minus depreciation. d....

The amount by which government purchases and transfers exceed tax revenues is known as the

The amount by which government purchases and transfers exceed tax revenues is known as the a. primary current deficit. b. primary deficit. c. government...

The deficit is

The deficit is a. the amount by which government purchases, transfers, and net interest exceed tax revenues. b. total tax revenues minus net interest...

The primary deficit is equal to

The primary deficit is equal to a. government purchases + transfers + net interest - tax revenues. b. outlays + net interest - tax revenues. c. outlays...

The largest source of tax receipts for the government in the U.S. is

The largest source of tax receipts for the government in the U.S. is a. personal taxes. b. corporate taxes. c. contributions for social insurance. d....

The three main categories of government outlays are

The three main categories of government outlays are  a. government purchases, transfer payments, and net interest payments. b. net interest payments,...

Subtracting government investment from government purchases gives us the amount of government

Subtracting government investment from government purchases gives us the amount of government a. consumption expenditures. b. primary expenditures. c....

If a firm is planning to borrow money in the future, the rate it is trying to lock in is

If a firm is planning to borrow money in the future, the rate it is trying to lock in is a. the current forward rate b. the current spot rate c. the...

The implied repo rate is similar to the

The implied repo rate is similar to the a. internal rate of return b. cost of hedging c. yield on the futures contract d. all of the above e. none...

The transaction designed to exploit mispricing in the relationship between futures and spot prices is called

The transaction designed to exploit mispricing in the relationship between futures and spot prices is called  a. a repurchase agreement b. a...

Which of the following statements does NOT accurately reflect the relationship between securities and synthetic forward contracts?

Which of the following statements does NOT accurately reflect the relationship between securities and synthetic forward contracts? A) Forward = stock...

When selecting among various put options with different strike prices, in order to hedge a long asset position, which of the following statements is true?

When selecting among various put options with different strike prices, in order to hedge a long asset position, which of the following statements is...

All of the positions listed will benefit from a price decline, except:

All of the positions listed will benefit from a price decline, except: A) Short put B) Long put C) Short call D) Short stock Answer: ...

The spot price of the market index is $900. After 3 months, the market index is priced at $920. An investor has a long call option on the index at a strike price of $930. After 3 months, what is the investor's profit or loss?

The spot price of the market index is $900. After 3 months, the market index is priced at $920. An investor has a long call option on the index at a...

The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. What is the profit or loss to a short position if the spot price of the market index rises to $920 by the expiration date?

The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. What is the profit or loss to a short position...

A firm provides a service that benefits from decreasing employment. This firm has a risk exposure to macro event. All other variables being equal, which of the following derivative securities is the firm most likely use to hedge its exposure?

A firm provides a service that benefits from decreasing employment. This firm has a risk exposure to macro event. All other variables being equal, which...

According to trading volume data tabulated by the Wall Street Journal for April 15, 2010, which index futures contact experienced the highest total open interest?

According to trading volume data tabulated by the Wall Street Journal for April 15, 2010, which index futures contact experienced the highest total...

Assume that you open a 100-share short position in Jiffy, Inc. common stock at the bid-ask price of $32.00 - $32.50. When you close your position, the bid-ask prices are $32.50 - $33.00. If you pay a commission rate of 0.5%, what is your profit or loss on the short investment?

Assume that you open a 100-share short position in Jiffy, Inc. common stock at the bid-ask price of $32.00 - $32.50. When you close your position, the...

Assume that you purchase 100 shares of Jiffy, Inc. common stock at the bid-ask prices of $32.00 - $32.50. When you sell, the bid-ask prices are $32.50 - $33.00. If you pay a commission rate of 0.5%, what is your profit or loss?

Assume that you purchase 100 shares of Jiffy, Inc. common stock at the bid-ask prices of $32.00 - $32.50. When you sell, the bid-ask prices are $32.50...

What is the cost of 100 shares of Jiffy, Inc. stock given that the bid-ask prices are $31.25 - $32.00 and a $15.00 commission per transaction exists?

What is the cost of 100 shares of Jiffy, Inc. stock given that the bid-ask prices are $31.25 - $32.00 and a $15.00 commission per transaction exists? A)...

Select the family member who is offering the most diversification to the rest of the family.

Select the family member who is offering the most diversification to the rest of the family. A) Dad works for General Motors B) Mom works for Goodyear C)...

All of the following are financially engineered products, except:

All of the following are financially engineered products, except: A) Mortgage B) Mortgage backed security C) Interest only D) Principal only Answer:...

During the growing season, a corn farmer sells short corn futures contracts in an amount equal to her crop. If upon harvesting and selling her crop she maintains the contracts, she is then considered a(n):

During the growing season, a corn farmer sells short corn futures contracts in an amount equal to her crop. If upon harvesting and selling her crop...

A mutual fund is engaged in the short term and temporary purchase of index futures, for purposes of minimizing its cash exposures. Which "use" most closely explains their actions?

A mutual fund is engaged in the short term and temporary purchase of index futures, for purposes of minimizing its cash exposures. Which "use" most...

Who from the following list would be considered a speculator by entering into a futures or options contract on commodities?

Who from the following list would be considered a speculator by entering into a futures or options contract on commodities? A) Farmer B) Corn delivery...

Which of the following is not a derivative instrument?

Which of the following is not a derivative instrument? A) Contract to sell corn B) Option agreement to buy land C) Installment sales agreement D)...

Option payoffs: What is the payoff for a put option with a strike price of $20 if the price of the underlying stock at expiration is $18?

Option payoffs: What is the payoff for a put option with a strike price of $20 if the price of the underlying stock at expiration is $18? A) $0 B)...

Option payoffs: You have sold a call option on ABC Co. stock with a strike price of $40. You do not intend to make any other transactions before the options expiration date. The current stock price is $20. Which of the following statements best describes your hopes for the stock?

Option payoffs: You have sold a call option on ABC Co. stock with a strike price of $40. You do not intend to make any other transactions before the...

Option payoffs: You own a put option on ABC. Co. stock with a strike price of $40. The current stock price is $40. You will benefit if

Option payoffs: You own a put option on ABC. Co. stock with a strike price of $40. The current stock price is $40. You will benefit if A) the stock...

Option payoffs: What is the payoff for a call option with a strike price of $45 if the underlying stock price at expiration is $75?

Option payoffs: What is the payoff for a call option with a strike price of $45 if the underlying stock price at expiration is $75? A) $30 B) $45 C)...

A local city government has awarded a contract to sequentially build five new elementary schools over the next 10 years. The price for each school has been spelled out in the contract, but at the beginning of each year the city can cancel the order for the remaining schools. The city government is concerned that if the population of the town does not grow as expected it may not need all of the schools. What sort of financial option does the option to cancel the order resemble?

A local city government has awarded a contract to sequentially build five new elementary schools over the next 10 years. The price for each school has...

RealEstates LLP is considering the construction of a new development of condominiums in downtown Austin, Texas. The site for the new development is currently occupied by an office building owned by the city. The project's profitability will depend largely on the population increase in Austin over the next several years. Rather than buy the site, RealEstates has entered into an agreement with the city to pay $200,000 for the right to purchase the site for $10 million two years from now. The real option embedded in this contract is best described as

RealEstates LLP is considering the construction of a new development of condominiums in downtown Austin, Texas. The site for the new development is...

Suppose you own a put option on a stock with a strike price of $35 that expires today. The price of the underlying stock is $25. If you purchase the stock and exercise the put option,

Suppose you own a put option on a stock with a strike price of $35 that expires today. The price of the underlying stock is $25. If you purchase the...

Suppose you own a call option on a stock with a strike price of $20 that expires today. The price of the underlying stock is $15. If you exercise the option and immediately sell the stock,

Suppose you own a call option on a stock with a strike price of $20 that expires today. The price of the underlying stock is $15. If you exercise the...

Which one of the following statements about the sustainable growth rate (SGR) is NOT true?

Which one of the following statements about the sustainable growth rate (SGR) is NOT true? A) The higher a firm's ROE, the higher the SGR. B) The...

Which one of the following statements about the sustainable growth rate (SGR) is NOT true?

Which one of the following statements about the sustainable growth rate (SGR) is NOT true? A) The SGR is a function of the plowback ratio and the...

The sustainable growth rate (SGR)

The sustainable growth rate (SGR) A) is a function of the plowback ratio and the ROE. B) the rate of growth that the firm can sustain without selling...

Firms that achieve higher growth rates without seeking external financing

Firms that achieve higher growth rates without seeking external financing A) have a low plowback ratio. B) have less equity and/or are able to generate...

Firms that achieve higher growth rates without seeking external financing

Firms that achieve higher growth rates without seeking external financing A) have a high plowback ratio. B) have less equity and/or are able to generate...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) The internal growth rate (IGR) is defined as the maximum growth rate that a firm can achieve...

External funding needed (EFN) is

External funding needed (EFN) is A) the additional debt or equity a firm needs to issue so that it can purchase additional assets to support an increase...

In accounting for changes in fixed assets, which one of the following statements is NOT true?

In accounting for changes in fixed assets, which one of the following statements is NOT true? A) When a firm is not operating at full capacity, sales...

In accounting for changes in fixed assets, which one of the following statements is NOT true?

In accounting for changes in fixed assets, which one of the following statements is NOT true? A) When a firm is not operating at full capacity, sales...

Some weaknesses in financial planning models include:

Some weaknesses in financial planning models include: A) Interest expense is not accounted for. B) All working capital accounts do not necessarily...

In using more sophisticated planning models, which one of the following statements is NOT true?

In using more sophisticated planning models, which one of the following statements is NOT true? A) Current liabilities are likely to vary directly...

In using more sophisticated planning models, which one of the following statements is NOT true?

In using more sophisticated planning models, which one of the following statements is NOT true? A) Current liabilities are likely to vary directly...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) The ratio of total assets to sales is called the capital intensity ratio. B) The ratio of sales...

Which statement is NOT true for a firm that is operating at full capacity?

Which statement is NOT true for a firm that is operating at full capacity? A) Fixed assets vary directly with sales. B) Fixed assets can never vary...

One statement that is NOT true about more sophisticated financial planning model is that:

One statement that is NOT true about more sophisticated financial planning model is that: A) only fixed costs change directly with sales. B) working...

Planning models that are more sophisticated than the percent of sales method have

Planning models that are more sophisticated than the percent of sales method have A) all variable costs change directly with sales. B) working capital...

Which one of the following statements is NOT true about financial planning models?

Which one of the following statements is NOT true about financial planning models? A) Financial statements serve as the first major input and become...

Which one of the following is NOT an input in financial planning models?

Which one of the following is NOT an input in financial planning models? A) Financial statements B) Pro forma financial statements C) Investment...

The inputs used in building financial planning models include

The inputs used in building financial planning models include A) financial statements, sales forecasts, and the firm's investment decisions. B) pro...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Sales forecasts models are typically very basic and use no complicated analysis. B) are generated...

The sales forecasts used in financial planning

The sales forecasts used in financial planning A) are developed using a variety of techniques. B) are generated within the firm. C) utilize macroeconomic...

Financial planning models

Financial planning models A) help management make investment decisions. B) help management make financing decisions. C) make the process speedy and...

The financial plan focuses on

The financial plan focuses on A) the inventory accounting method decision and the accounts payables decision. B) the current assets decision and the...

The financial plan includes

The financial plan includes A) the strategic plan, financing plan, and options plan. B) the strategic plan, investment plan, and financing plan. C)...

Which one of the following is NOT part of a financing plan?

Which one of the following is NOT part of a financing plan? A) The dollar amount of funds that has to be raised externally and the sources of funds...

The financing plan of a firm will indicate

The financing plan of a firm will indicate A) the dollar amount of funds that has to be raised externally and the sources of funds available to the...

Which one of the following is NOT true about the capital budgeting process?

Which one of the following is NOT true about the capital budgeting process? A) Management identifies a list of potential projects that are consistent...

Which one of the following is NOT true about the capital budgeting process?

Which one of the following is NOT true about the capital budgeting process? A) Management identifies a list of potential projects that are consistent...

Which one of the following is true about capital expenditures?

Which one of the following is true about capital expenditures? A) It is part of a firm's investment plan. B) Once a capital investment is made, they...

The strategic plan does NOT identify

The strategic plan does NOT identify A) major areas of investment in real assets. B) future mergers, alliances, and divestitures. C) working capital...

The strategic plan identifies

The strategic plan identifies A) the lines of business in which a firm will compete. B) major areas of investment in real assets. C) capital expenditures,...

According to the text, the financial plan covers a period of

According to the text, the financial plan covers a period of A) one year. B) three to five years. C) ten years. D) None of the above Answer:...

All but one of the following issues are addressed in the financial plan.

All but one of the following issues are addressed in the financial plan. A) What is the growth rate for a firm's main competitor? B) Where is the...

The financial plan addresses the following issue(s):

The financial plan addresses the following issue(s): A) Where is the company headed? B) What capital resources does the management need to get there? C)...

Which of the following components make up a financial plan

Which of the following components make up a financial plan A) the strategic plan. B) the investment plan. C) the financing plan. D) All of the above. Answer:...

Good Signal Co. is currently trading for $10 with 1 million shares outstanding. Which of the following actions would be the most credible signal that management believes that the long-term prospects for a company has improved?

Good Signal Co. is currently trading for $10 with 1 million shares outstanding. Which of the following actions would be the most credible signal that...

GHI Co. has just announced that the board has reached a targeted stock repurchase agreement with a large stockholder. The company will repurchase all of the large investor's stock for 90 percent of the current market value. When the stock repurchase was announced, the shares of GHI Co. fell by 7 percent. Which one of these explanations could reasonably explain the drop in share price?

GHI Co. has just announced that the board has reached a targeted stock repurchase agreement with a large stockholder. The company will repurchase all...

Which one of these actions could by itself have an impact on the control of the firm?

Which one of these actions could by itself have an impact on the control of the firm? A) A tender offer stock repurchase B) A special dividend payment C)...

Which of the following considerations should NOT be related to management's concerns when setting a dividend or stock repurchase policy?

Which of the following considerations should NOT be related to management's concerns when setting a dividend or stock repurchase policy? A) Over...

Which one of the following statements describes the finding from academic studies on corporate dividend policy?

Which one of the following statements describes the finding from academic studies on corporate dividend policy? A) Managers tend to increase regular...

Generally, management undertakes a reverse stock split to

Generally, management undertakes a reverse stock split to A) send a signal to investors that the company is expected to perform poorly. B) meet the...

Suppose you own shares of ThreeFor, Inc., which has just announced a 3-for-1 stock split. Immediately after the announcement, the price of the company's shares rose by 5 percent. You don't expect any new information about the company until after the stock split. Ignoring any discounting for time, if you intend to sell your shares soon, you should

Suppose you own shares of ThreeFor, Inc., which has just announced a 3-for-1 stock split. Immediately after the announcement, the price of the company's...

Suppose you are advising a retiree who holds 2,000 shares of LargeDiv Corp. The company is largely held by tax-paying institutional investors and has announced that it will shortly be issuing a large dividend. Because the shares are held in the retiree's Roth IRA, she will not incur taxes on either capital gains or dividends. The retiree has decided to sell the shares sometime this year, and use the money for living expenses. You expect the only upcoming change in the stock price will result from the dividend. Ignoring any discounting for time, what advice should you give?

Suppose you are advising a retiree who holds 2,000 shares of LargeDiv Corp. The company is largely held by tax-paying institutional investors and has...

In early 2003, the U.S. government cut the tax rate on dividends to a flat 15 percent instead of treating dividend payments as other income. All else being equal, how would we expect the number of companies paying dividends to change.

In early 2003, the U.S. government cut the tax rate on dividends to a flat 15 percent instead of treating dividend payments as other income. All else...

Which of the following statements about the relative advantages of stock repurchases over dividends is NOT true?

Which of the following statements about the relative advantages of stock repurchases over dividends is NOT true? A) Stock repurchases send a stronger...

Which of the following explanations is NOT a possible benefit of dividends?

Which of the following explanations is NOT a possible benefit of dividends? A) Some investors prefer dividend-paying stocks and will be willing to...

Which type of stock repurchase allows management to set the repurchase price at the lowest level necessary to repurchase the desired number of shares?

Which type of stock repurchase allows management to set the repurchase price at the lowest level necessary to repurchase the desired number of shares? A)...

Which type of stock repurchase often takes place at a price below the current market price of the stock?

Which type of stock repurchase often takes place at a price below the current market price of the stock? A) Open-market repurchase B) Fixed-price...

Which of the following is NOT a possible result of a stock repurchase?

Which of the following is NOT a possible result of a stock repurchase? A) Removing a large number of shares from circulation can change the ability...

Which one of these examples does NOT meet the strict definition for a dividend?

Which one of these examples does NOT meet the strict definition for a dividend? A) Steel Gen Corp regularly distributes $0.05 to each shareholder...

The shares of ABC, Inc., fell sharply today after the company announced that it is increasing its regular cash dividend distributions. Which one of the following explanations may explain investors' negative reaction?

The shares of ABC, Inc., fell sharply today after the company announced that it is increasing its regular cash dividend distributions. Which one of...

Which step in the dividend payment process for a public company usually results in a change in the company's stock price? Assume the dividend has changed from the last dividend paid.

Which step in the dividend payment process for a public company usually results in a change in the company's stock price? Assume the dividend has changed...

Consider a company that had unexpectedly higher earnings last quarter and intends to pay out some additional value to shareholders. Which type of dividend is the company likely to use?

Consider a company that had unexpectedly higher earnings last quarter and intends to pay out some additional value to shareholders. Which type of dividend...

Which type of dividend is used to distribute any remaining value when the company's assets are being sold as the company is terminated?

Which type of dividend is used to distribute any remaining value when the company's assets are being sold as the company is terminated? A) Regular...

Which type of dividend is most likely to be used to distribute the revenue from a one-time sale of a large asset?

Which type of dividend is most likely to be used to distribute the revenue from a one-time sale of a large asset? A) Regular cash dividend B) Extra...

Which of the following will limit the asset abuse problem for the lessor?

Which of the following will limit the asset abuse problem for the lessor? A) Track the total services obtained from the asset and charge the lessee...

Which of the following arises because the lessee can have the incentive to use the asset more than the lessor would prefer?

Which of the following arises because the lessee can have the incentive to use the asset more than the lessor would prefer? A) Operating lease conflict B)...

Which of the following should a company consider when deciding to buy or lease an asset?

Which of the following should a company consider when deciding to buy or lease an asset? A) Taxes B) Information or transaction costs C) If the choice...

Which of the following supports the trade-off theory of capital structure?

Which of the following supports the trade-off theory of capital structure? A) Firms use cash on hand first, since issuing equity and debt is expensive. B)...

The underinvestment problem occurs in a financially distressed firm when

The underinvestment problem occurs in a financially distressed firm when A) the value of investing in a positive-NPV project is likely to go to debt...

The asset substitution problem occurs when

The asset substitution problem occurs when A) managers substitute riskier assets for less risky ones to the detriment of bondholders. B) managers...

The use of debt financing

The use of debt financing A) reduces agency costs between the stockholders and management by increasing the amount of risk the managers take. B)...

Which of these is not an example of indirect bankruptcy costs?

Which of these is not an example of indirect bankruptcy costs? A) A firm's customers become concerned about whether or not warranties will be honored. B)...

Which of these statements about direct bankruptcy costs is not true?

Which of these statements about direct bankruptcy costs is not true? A) Direct bankruptcy costs include the hiring of additional accountants, lawyers,...

The use of debt financing

The use of debt financing A) may cause a manager to take on riskier projects in order to make interest payments. B) is more expensive than issuing...

Academic studies have estimated that the tax benefit of debt realized by firms is approximately

Academic studies have estimated that the tax benefit of debt realized by firms is approximately A) 10% of firm value. B) a 10% reduction in WACC. C)...

In order to calculate the present value of debt tax savings, the _______ is used as the discount rate.

In order to calculate the present value of debt tax savings, the _______ is used as the discount rate. A) WACC B) risk-free rate C) required rate...

The interest tax shield

The interest tax shield A) does not affect the WACC. B) makes it less costly to distribute cash to the security holder through interest payments...

Which of the following is a reason financial policy might matter?

Which of the following is a reason financial policy might matter? A) Firms must pay corporate income taxes. B) Capital structure choices can affect...

Financial risk

Financial risk A) refers to the effect that a firm's financing decisions has on the riskiness to cash flows that investors will receive. B) increases...

According to M&M Proposition 2, the cost of a firm's equity

According to M&M Proposition 2, the cost of a firm's equity A) increases with the debt-to-equity ratio. B) decreases with the debt-to-equity...

M&M Proposition 2 states that the cost of a firm's common stock is related to

M&M Proposition 2 states that the cost of a firm's common stock is related to A) the debt-to-equity ratio. B) the required rate of return on...

The weighted average cost of capital (WACC) includes

The weighted average cost of capital (WACC) includes A) the required return on equity and required return on underlying firm assets. B) the cost...

A financial restructuring

A financial restructuring A) will not change the value of a firm's real assets under M&M Proposition 1. B) includes financial transactions that...

A firm's enterprise value is given by

A firm's enterprise value is given by A) the value of equity plus the value of debt. B) the value of equity minus the value of debt. C) the value...

M&M Proposition 1 assumes all of the following except that

M&M Proposition 1 assumes all of the following except that A) there are no taxes. B) there are no costs to acquiring information. C) there are...

The optimal capital structure of a firm

The optimal capital structure of a firm A) minimizes the cost of financing a firm's projects. B) minimizes interest payments to creditors. C) maximizes...

A firm's capital structure is the mix of financial securities used to finance its activities and can include all of the following except

A firm's capital structure is the mix of financial securities used to finance its activities and can include all of the following except A) stock. B)...

Why is the total cost of bringing a general cash offer to the market lower than issuing an IPO?

Why is the total cost of bringing a general cash offer to the market lower than issuing an IPO? a. They do not include a large underpricing b. Underwriting...

The most likely reason that underpricing of new issues occurs more frequently than overpricing is the:

The most likely reason that underpricing of new issues occurs more frequently than overpricing is the: A) Underwriters' desire to reduce the risk...

Which ONE of the following statements is true?

Which ONE of the following statements is true? A) Under federal securities law, they can be resold to investors in the public markets immediately...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) PIPE transactions are registered with the SEC. B) PIPE transactions are not registered with...

Private equity firms improve the performance of firms in which they invest by:

Private equity firms improve the performance of firms in which they invest by: A) making sure that the firms have the best possible management teams. B)...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Private equity firms pool money from wealthy investors, pension funds, insurance companies,...

Advantages of private placements include:

Advantages of private placements include: A) Cost of funds may be lower. B) Private lenders are more willing to negotiate changes to a bond contract. C)...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Private placement occurs when a firm sells unregistered securities directly to investors such...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) For many smaller firms and firms of lower credit standing that have limited access, or no access,...

Benefits from shelf registration include all EXCEPT:

Benefits from shelf registration include all EXCEPT: A) Greater flexibility in bringing securities to market. B) Shelf registration allows firms...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Shelf registration gives firms less flexibility in bringing securities to market. B) During...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) In a competitive sale, the firm specifies the type and amount of securities it wants to sell. B)...

Data from the marketplace show that the shares sold in an IPO are typically

Data from the marketplace show that the shares sold in an IPO are typically A) priced between 2 and 5 percent below the price at which they close...

The three basic costs associated with issuing stock in an IPO are

The three basic costs associated with issuing stock in an IPO are A) price premium, out-of-pocket expenses, and underpricing. B) underwriting spread,...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) In a best-efforts offering, the underwriters will suffer a financial loss if the offer price...

With a best-efforts underwriting

With a best-efforts underwriting A) the investment banking firm makes no guarantee to sell the securities at a particular price. B) the investment...

All of the following about a firm-commitment underwriting is true EXCEPT:

All of the following about a firm-commitment underwriting is true EXCEPT: A) The investment banker guarantees the issuer a fixed amount of money from...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Investment bankers provide three basic services when bringing securities to market—origination,...

Basic services investment bankers provide when bringing securities to market include

Basic services investment bankers provide when bringing securities to market include A) Origination B) Underwriting C) distribution. D) All of the...

Disadvantages of going public include all EXCEPT

Disadvantages of going public include all EXCEPT A) Managers' tendency to focus on long-term profits. B) The high cost of the IPO itself. C) The costs...

Which ONE of the following statements is true?

Which ONE of the following statements is true? A) After the IPO, there is a less active secondary market for the firm's shares. B) Only smaller amounts...

Advantages of going public include all EXCEPT

Advantages of going public include all EXCEPT A) Larger amount of capital can be raised this way than the amount that can be raised through private...

Which ONE of the following statements is true?

Which ONE of the following statements is true? A) A typical venture capital fund may generate annual returns of 15 to 25 percent on the money that...

The three principal ways in which venture capital firms exit venture-backed companies are

The three principal ways in which venture capital firms exit venture-backed companies are A) selling to a strategic buyer, buying out the founder,...

Provisions that are part of venture capital agreements include

Provisions that are part of venture capital agreements include A) timing of exit, number of board positions after exit, and what price is acceptable. B)...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Venture capitalists often require an entrepreneur to make a substantial personal investment...

Tactics that venture capitalists use to reduce the risk of their investment include

Tactics that venture capitalists use to reduce the risk of their investment include A) funding the ventures in stages, requiring entrepreneurs to...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Approximately $23 billion was invested in venture capital funds in 2010. B) The venture capital...

Which ONE of the following statements is true?

Which ONE of the following statements is true? A) The venture capital industry as we know it today emerged in the late 1960s with the formation of...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) The process by which many entrepreneurs raise ?seed? money and obtain other resources necessary...

Bootstrapping is the process by which

Bootstrapping is the process by which A) many entrepreneurs raise - seed -money and obtain other resources necessary to start their businesses. B)...

The initial seed money comes from

The initial seed money comes from A) public investors. B) investment banks. C) the entrepreneur or other founders. D) commercial banks. Answer:...

Which of the following is a short-term financing instrument?

Which of the following is a short-term financing instrument? A) Accounts payable B) Bank loans with a maturity of less than 1 year C) Commercial paper D)...

Which of the following is the equation for net working capital?

Which of the following is the equation for net working capital? A) Total assets - total liabilities B) Current assets - current liabilities C) Current...

Operating cycle: Trend Foods distributes its products to more than 100 restaurants and delis. The company's collection period is 32 days, and it keeps its inventory for 10 days. What is Trend's operating cycle?

Operating cycle: Trend Foods distributes its products to more than 100 restaurants and delis. The company's collection period is 32 days, and it keeps...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Accounts payable (trade credit), bank loans, and commercial paper are common sources of short-term...

Which one of the following statements is NOT true?

Which one of the following statements is NOT true? A) Firms using matching maturity strategy fund all working capital needs with long-term borrowing. B)...