If the risk-free rate is 4 percent, an all-equity firm's beat is 2, and the market risk premium is 6 percent, what is the firm's cost of capital?

If the risk-free rate is 4 percent, an all-equity firm's beat is 2, and the market risk premium is 6 percent, what is the firm's cost of capital? Answer: 4%...

Suppose the risk-free rate is 5%, the market rate of return is 10%, and beta is 2%. Find the required rate of return using CAPM.

Suppose the risk-free rate is 5%, the market rate of return is 10%, and beta is 2%. Find the required rate of return using CAPM. Answer: 5% +...

MNO preferred stocks pays dividend of $2 per year and gas a price of $20. If MNO's tax rate is 40%, the Aftertax rate of return om its preferred stock is:

MNO preferred stocks pays dividend of $2 per year and gas a price of $20. If MNO's tax rate is 40%, the Aftertax rate of return om its preferred stock...

Find a venture's "economic value added" (EVA) based on the following information: EBIT = $200,000; financial capital used = $500,000; WACC = 20%; effective tax rate = 30%.

Find a venture's "economic value added" (EVA) based on the following information: EBIT = $200,000; financial capital used = $500,000; WACC = 20%; effective...

Estimate a firm's economic value added (EVA) based on: NOPAT = $400,000; amount of financial capital used = $1,600,000; and WACC = 19%.

Estimate a firm's economic value added (EVA) based on: NOPAT = $400,000; amount of financial capital used = $1,600,000; and WACC = 19%.  a. $26,000 b....

Estimate a firm's NOPAT based on: Net sales = $2,000,000; EBIT = $600,000; Net income = $20,000; and Effective tax rate = 30%.

Estimate a firm's NOPAT based on: Net sales = $2,000,000; EBIT = $600,000; Net income = $20,000; and Effective tax rate = 30%. a. $600,000 b. $420,000 c....

Venture capital holding period returns (all stages) for the 10-year period ending in 2014, were approximately:

Venture capital holding period returns (all stages) for the 10-year period ending in 2014, were approximately: a. 20% b. 15% c. 10% d. 5% Ans...

Venture capital holding period returns (all stages) for the 20-year period ending in 2014, were approximately:

Venture capital holding period returns (all stages) for the 20-year period ending in 2014, were approximately: a. 34% b. 25% c. 14% d. 7% Ans...

Over the past 90 or so years, the variability (standard deviation) of average annual rates of return in the U.S. have been lowest for which of the following securities?

Over the past 90 or so years, the variability (standard deviation) of average annual rates of return in the U.S. have been lowest for which of the following...

Over the past 90 or so years, the average annual rates of return in the U.S. have been highest for which of the following securities?

Over the past 90 or so years, the average annual rates of return in the U.S. have been highest for which of the following securities? a. Five-year...

Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 12%; cost of common equity = 25%; common equity = $700,000; interest-bearing debt = $300,000; and a tax rate = 25%.

Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 12%; cost of common equity = 25%; common equity = $700,000;...

Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 16%; cost of common equity = 30%; equity to value = 60%; debt to value = 40%; and a tax rate = 25%.

Calculate the after-tax WACC based on the following information: nominal interest rate on debt = 16%; cost of common equity = 30%; equity to value =...

Calculate the weighted average cost of capital (WACC) based on the following information: the equity multiplier is 1.66; the interest rate on debt is 13%; the required return to equity holders is 22%; and the tax rate is 35%.

Calculate the weighted average cost of capital (WACC) based on the following information: the equity multiplier is 1.66; the interest rate on debt is...

Calculate the weighted average cost of capital (WACC) based on the following information: the capital structure weights are 50% debt and 50% equity; the interest rate on debt is 10%; the required return to equity holders is 20%; and the tax rate is 30%.

Calculate the weighted average cost of capital (WACC) based on the following information: the capital structure weights are 50% debt and 50% equity;...

Use the SML model to calculate the cost of equity for a firm based on the following information: the firm's beta is 1.5; the risk free rate is 5%; the market risk premium is 2%.

Use the SML model to calculate the cost of equity for a firm based on the following information: the firm's beta is 1.5; the risk free rate is 5%; the...

The cost of equity for a firm is 20%. If the real interest rate is 5%, the inflation premium is 3%, and the market risk premium is 2%, what is the investment risk premium for the firm?

The cost of equity for a firm is 20%. If the real interest rate is 5%, the inflation premium is 3%, and the market risk premium is 2%, what is the investment...

Which of the following types of financing would be associated with the highest target compound rate of return?

Which of the following types of financing would be associated with the highest target compound rate of return? a. public and seasoned financing b....

A venture's "riskiness" in terms of possible poor performance or failure would be considered to be "very high" in which of the following life cycle stages:

A venture's "riskiness" in terms of possible poor performance or failure would be considered to be "very high" in which of the following life cycle...

Which of the following venture life cycle stages would involve seasoned financing rather than venture financing?

Which of the following venture life cycle stages would involve seasoned financing rather than venture financing? a. Development stage b. Startup stage c....

Corporate bonds might involve which of the following types of "premiums."

Corporate bonds might involve which of the following types of "premiums." a. inflation premium b. default risk premium c. liquidity premium d. maturity...

Venture investors generally use which one of the following target rates to discount the projected cash flows of ventures in the "development" stage of their life cycles:

Venture investors generally use which one of the following target rates to discount the projected cash flows of ventures in the "development" stage...

What has been the approximate average annual rate of return on publicly traded small company stocks since the mid-1920s?

What has been the approximate average annual rate of return on publicly traded small company stocks since the mid-1920s? a. 10% b. 16% c. 25% d....

The difference between average annual returns on common stocks and returns on long-term government bonds is called a:

The difference between average annual returns on common stocks and returns on long-term government bonds is called a: a. default risk premium b. maturity...

The word "risk" developed from the early Italian word "risicare" and means:

The word "risk" developed from the early Italian word "risicare" and means: a. don't care b. take a chance c. to dare d. to gamble Answer: to...

Which of the following components is not typically included in the rate on short-term U.S. treasuries?

Which of the following components is not typically included in the rate on short-term U.S. treasuries? a. liquidity premium b. default risk premium c....

Venture investors generally use which one of the following target rates to discount the projected cash flows of ventures in the "startup" stage of their life cycles:

Venture investors generally use which one of the following target rates to discount the projected cash flows of ventures in the "startup" stage of their...

The "risk-free" interest rate is the sum of:

The "risk-free" interest rate is the sum of: a. a real rate of interest and an inflation premium b. a real rate of interest and a default risk premium c....

Your venture has net income of $600, taxable income of $1,000, operating profit of $1,200, total financial capital including both debt and equity of $9,000, a tax rate of 40%, and a WACC of 10%. What is your venture's EVA?

Your venture has net income of $600, taxable income of $1,000, operating profit of $1,200, total financial capital including both debt and equity of...

A venture has raised $4,000 of debt and $6,000 of equity to finance its firm. Its cost of borrowing is 6%, its tax rate is 40%, and its cost of equity capital is 8%. What is the venture's weighted average cost of capital?

A venture has raised $4,000 of debt and $6,000 of equity to finance its firm. Its cost of borrowing is 6%, its tax rate is 40%, and its cost of equity...

Suppose the real risk free rate of interest is 4%, maturity risk premium is 2%, inflation premium is 6%, the default risk on similar debt is 3%, and the liquidity premium is 2%. What is the nominal interest rate on this venture's debt capital?

Suppose the real risk free rate of interest is 4%, maturity risk premium is 2%, inflation premium is 6%, the default risk on similar debt is 3%, and...

The added interest rate charged due to the inherent increased risk in long-term debt is called?

The added interest rate charged due to the inherent increased risk in long-term debt is called? a. inflation premium b. default risk premium c. liquidity...

The additional premium added to the real interest rate by lenders to compensate them for a debt instrument which cannot be converted to cash quickly at its existing value is called?

The additional premium added to the real interest rate by lenders to compensate them for a debt instrument which cannot be converted to cash quickly...

The additional interest rate premium required to compensate the lender for the probability that a borrower will not be able to repay interest and principal on a loan is known as?

The additional interest rate premium required to compensate the lender for the probability that a borrower will not be able to repay interest and principal...

Which of the following is not a component in determining the cost of debt?

Which of the following is not a component in determining the cost of debt? a. inflation premium b. default risk premium c. liquidity premium d....

Which of the following describes the interest rate charged by banks to their highest quality customers?

Which of the following describes the interest rate charged by banks to their highest quality customers? a. real rate b. nominal rate c. risk-free...

Which of the following describes the interest rate on debt that is virtually free of default risk?

Which of the following describes the interest rate on debt that is virtually free of default risk? a. real rate b. nominal rate c. risk-free rate d....

Which of the following describes the interest rate in addition to the inflation rate expected on a risk-free loan?

Which of the following describes the interest rate in addition to the inflation rate expected on a risk-free loan? a. real rate b. nominal rate c....

Which of the following describes the observed or stated interest rate?

Which of the following describes the observed or stated interest rate? a. real rate b. nominal rate c. risk-free rate d. prime rate e. inflation...

Which of the following is an example of rent on financial capital?

Which of the following is an example of rent on financial capital? a. interest on debt b. dividends on stock c. collateral on equity d. a and b e....

Which of the following markets involve direct two-party negotiations over illiquid, non-standardized contracts such as bank loans and direct placement of debt?

Which of the following markets involve direct two-party negotiations over illiquid, non-standardized contracts such as bank loans and direct placement...

Which one of the following markets involve liquid securities with standardized contract features such as stocks and bonds?

Which one of the following markets involve liquid securities with standardized contract features such as stocks and bonds? a. private financial market b....

The primary exemption from the prohibition of resale of unregistered securities (including, but not limited to, securities safely harbored in Rules 505 and 506 offerings) is:

The primary exemption from the prohibition of resale of unregistered securities (including, but not limited to, securities safely harbored in Rules...

Rule 503 dictates that for all Reg D exemptions, a Form D should be filed within how many days after the first sale of securities?

Rule 503 dictates that for all Reg D exemptions, a Form D should be filed within how many days after the first sale of securities? a. 1 day b. 15...

Rule 502 of Regulation D deals with:

Rule 502 of Regulation D deals with: a. integration f. information g. solicitation h. resale i. a and b above e. a, b, c, and d above Answer: a,...

Which of the following are requirements of natural persons to be accredited investors under Regulation D Rule 501?

Which of the following are requirements of natural persons to be accredited investors under Regulation D Rule 501? a. net worth greater than $5 million b....

Which of the following is not a condition of a Regulation D offering under Rule 502?

Which of the following is not a condition of a Regulation D offering under Rule 502? a. integration b. offering c. information d. solicitation e....

Rule 501 of Regulation D expands the categories of accredited investors. Which is not one of the categories?

Rule 501 of Regulation D expands the categories of accredited investors. Which is not one of the categories? a. any organization formed for the specific...

Which Title of the JOBS Act of 2012 established a small offering registration exemption involving the sales of securities to an Internet "crowd?"

Which Title of the JOBS Act of 2012 established a small offering registration exemption involving the sales of securities to an Internet "crowd?" a....

The JOBS Act of 2012 provides for which of the following:

The JOBS Act of 2012 provides for which of the following: a. establishes a new business classification called "Emerging Growth Company" b. lifts restrictions...

Under Regulation A, which one of the following is not true?

Under Regulation A, which one of the following is not true? a. issuers are allowed to test the waters prior to preparing the offering circular b....

Which of the following exemptions involves a public, and not a private, offering?

Which of the following exemptions involves a public, and not a private, offering? a. Section 4(2) b. Rule 501 c. Rule 505 d. Rule 506 e. Regulation...

Of the following, which is not true about Regulation A?

Of the following, which is not true about Regulation A? a. it is shorter and simpler than the full registration b. it does not have limitations on...

Which one of the following is not a characteristic of Regulation A?

Which one of the following is not a characteristic of Regulation A? a. An offering is limited to $5 million b. the number offerees or investors is...

An offering that raises $2,500,000 over a 12-month period, involving 35 unaccredited investors and 5 accredited investors, might be exempt from registration under:

An offering that raises $2,500,000 over a 12-month period, involving 35 unaccredited investors and 5 accredited investors, might be exempt from registration...

While Section 4(2) does not limit the dollar amount of an offering, the interpretation of the law has stipulated that:

While Section 4(2) does not limit the dollar amount of an offering, the interpretation of the law has stipulated that: a. the investors must be sophisticated b....

Which one of the following "rules" under Regulation D has a $5 million financing limit?

Which one of the following "rules" under Regulation D has a $5 million financing limit? a. Rule 504 b. Rule 505 c. Rule 506 d. Rule 507 e. Rule...

Rule 506 of Regulation D is limited in terms of the number of unaccredited investors to:

Rule 506 of Regulation D is limited in terms of the number of unaccredited investors to: a. 20 b. 25 c. 30 d. 35 e. 40 Answer: 3...

Offerings exempted from registration under rule 505 of Regulation D may raise up to $5 million in a:

Offerings exempted from registration under rule 505 of Regulation D may raise up to $5 million in a:  a. 6-month period b. 9-month period c....

Rule 504 of Regulation D limits the total number of investors to:

Rule 504 of Regulation D limits the total number of investors to: a. 35 b. 100 c. 35 unaccredited investors and any number of accredited investors d....

Which one of the following SEC registration exemptions has a financing limit in a 12-month period and permits a maximum of 35 unaccredited investors?

Which one of the following SEC registration exemptions has a financing limit in a 12-month period and permits a maximum of 35 unaccredited investors? a....

Exemptions for private placement offerings and sales of securities in the amount of $2 million are handled under which one of the follow rules under Regulation D?

Exemptions for private placement offerings and sales of securities in the amount of $2 million are handled under which one of the follow rules under...

Which one of the following is not an exemption method for making an offering exempt from SEC registration?

Which one of the following is not an exemption method for making an offering exempt from SEC registration? a. 4(2) private offering b. accredited...

Unless your security is exempted, what Section of the Securities Act of 1933 requires you to file a registration statement with the SEC?

Unless your security is exempted, what Section of the Securities Act of 1933 requires you to file a registration statement with the SEC? a. Section...

Which SEC Regulation took effect in 1982 and provides the basis for "safe harbor" as a private placement?

Which SEC Regulation took effect in 1982 and provides the basis for "safe harbor" as a private placement? a. Regulation A b. Regulation B c. Regulation...

In the Ninth Circuit Court of Appeals decision on SEC v. Murphy, all of the following were considerations in determining an offering to be a private placement except:

In the Ninth Circuit Court of Appeals decision on SEC v. Murphy, all of the following were considerations in determining an offering to be a private...

The basic types of "transaction" exemptions for registration with the SEC are:

The basic types of "transaction" exemptions for registration with the SEC are: a. private placement exemption b. "too big to fail" exemption c. accredited...

"Security" exemptions from registration with the SEC include which of the following:

"Security" exemptions from registration with the SEC include which of the following: a. securities issued by banks and thrift institutions b. government...

The returning of all funds to equity investors as a common "remedy" for a "fouled up" securities offering is called:

The returning of all funds to equity investors as a common "remedy" for a "fouled up" securities offering is called: a. just action b. fraud c. second...

Which one of the following is not a requirement for registration of securities with the SEC?

Which one of the following is not a requirement for registration of securities with the SEC? a. the name under which the issuer is doing business b....

Investor liability is "unlimited" under which of the following types of business organizational forms?

Investor liability is "unlimited" under which of the following types of business organizational forms? a. proprietorship b. limited liability company...

Ventures that reach their survival stage of their life cycles and seek first-round financing are typically organized as:

Ventures that reach their survival stage of their life cycles and seek first-round financing are typically organized as: a. proprietorships or partnerships b....

All of the following do not create any securities registration responsibilities except?

All of the following do not create any securities registration responsibilities except? a. Treasury securities b. Municipal bonds c. securities issued...

Which of the following is not true about registering securities with the SEC?

Which of the following is not true about registering securities with the SEC? a. it is a time consuming process b. it required the disclosure of accounting...

State securities regulations are referred to as:

State securities regulations are referred to as: a. Regulation A legislation b. "stormy day" laws c. "blue sky" laws d. SEC oversight legislation Answer: "blue...

Which of the following is not a security?

Which of the following is not a security? a. treasury stock b. debenture c. put option d. real property e. call option Answer: real pr...

In securities law, which of the following is (are) true?

In securities law, which of the following is (are) true? a. ignorance is no defense b. security regulators may alter your investment agreement to...

Efforts to regulate the offerings and sales of securities take place under which of the following securities laws?

Efforts to regulate the offerings and sales of securities take place under which of the following securities laws? a. Securities Act of 1933 b. state...

The efforts to regulate the trading of securities takes place under which of the following securities laws?

The efforts to regulate the trading of securities takes place under which of the following securities laws? a. Securities Act of 1933 b. state "blue-sky"...

The U.S. federal law that impacts the creation and sales of securities is:

The U.S. federal law that impacts the creation and sales of securities is: a. Securities Exchange Act of 1934 b. Securities Act of 1933 c. Investment...

Which of the following is not true regarding the Securities Act of 1933?

Which of the following is not true regarding the Securities Act of 1933? a. it was passed in response to abuses thought to have contributed to the...

When long-term financial planning efforts set cash as a percentage of sales or as a fixed dollar amount for planning purposes, the projected cash flow statement is said to be a ________ forecasting statement.

When long-term financial planning efforts set cash as a percentage of sales or as a fixed dollar amount for planning purposes, the projected cash flow...

When projecting financial statements, one would first , and then proceed to :

When projecting financial statements, one would first , and then proceed to : a. project of the balance sheet, forecast sales. b. forecast sales,...

Which of the following is a forecasting method used to project financial statements?

Which of the following is a forecasting method used to project financial statements? a. percent-of-sales method b. percent-of-expenses method c....

Your firm recorded sales for the most recent year of $10 million generated from an asset base of $7 million, producing a $500,000 net income. Sales are projected to grow at 20%, causing spontaneous liabilities to increase by $200,000. In the most recent year, $200,000 was paid out as dividends, and the current payout ratio will continue in the upcoming years. What is your firm's AFN?

Your firm recorded sales for the most recent year of $10 million generated from an asset base of $7 million, producing a $500,000 net income. Sales...

Which one of the following would increase a firm's need for additional funds?

Which one of the following would increase a firm's need for additional funds? a. an increasing profit margin b. a decreasing expected sales growth...

The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called:

The financial funds still needed to finance asset growth after using spontaneously generated funds and any increase in retained earnings is called: a....

The increase in accounts payables and accruals that occur with a sales increase is called:

The increase in accounts payables and accruals that occur with a sales increase is called: a. spontaneously generated funds b. additional funds needed c....

The financial funds needed to acquire assets necessary to support a firm's sales growth is called:

The financial funds needed to acquire assets necessary to support a firm's sales growth is called:  a. spontaneously generated funds b. additional...

Determine a firm's "return on assets" percentage based on the following information: sustainable growth rate = 20%; total assets $500,000; beginning of year common equity $200,000; and dividend payout percentage = 60%.

Determine a firm's "return on assets" percentage based on the following information: sustainable growth rate = 20%; total assets $500,000; beginning...

Determine a firm's "financial policy" multiplier based on the following information: sustainable growth rate = 20%; net profit margin = 10%; and asset turnover = 2 times.

Determine a firm's "financial policy" multiplier based on the following information: sustainable growth rate = 20%; net profit margin = 10%; and asset...

Determine a venture's sustainable growth rate based on the following information: sales = $1,000,000; net income = $150,000; common equity at the end of last year = $520,000; and the dividend payout percentage = 20%.

Determine a venture's sustainable growth rate based on the following information: sales = $1,000,000; net income = $150,000; common equity at the end...

Determine a venture's sustainable growth rate based on the following information: sales = $1,000,000; net income = $100,000; common equity at the beginning of the year = $500,000; and the retention rate = 50%.

Determine a venture's sustainable growth rate based on the following information: sales = $1,000,000; net income = $100,000; common equity at the beginning...

A venture's common equity account increased by $100,000 the past year and ended the year at $500,000. What was its sustainable sales growth rate?

A venture's common equity account increased by $100,000 the past year and ended the year at $500,000. What was its sustainable sales growth rate? a....

A venture's common equity was $50,000 at the end of last year. If the venture's common equity at the end of this year was $60,000, what was its sustainable sales growth rate?

A venture's common equity was $50,000 at the end of last year. If the venture's common equity at the end of this year was $60,000, what was its sustainable...

If a venture has a return on assets (ROA) = 12%, an equity multiplier based on beginning equity = 3.0 times, and a sustainable growth rate of 18%, the retention rate would be:

If a venture has a return on assets (ROA) = 12%, an equity multiplier based on beginning equity = 3.0 times, and a sustainable growth rate of 18%, the...

If a venture has a return on assets (ROA) = 10%, an equity multiplier based on beginning equity = 4.0 times, and a dividend payout ratio of 60%, the sustainable growth rate would be:

If a venture has a return on assets (ROA) = 10%, an equity multiplier based on beginning equity = 4.0 times, and a dividend payout ratio of 60%, the...

If a venture has a return on assets (ROA) = 10%, an equity multiplier based on beginning equity = 3.5 times, and a retention rate = 50%, the sustainable growth rate would be:

If a venture has a return on assets (ROA) = 10%, an equity multiplier based on beginning equity = 3.5 times, and a retention rate = 50%, the sustainable...

Use the following information to estimate a venture's sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based on beginning common equity = 2.0 times; and Retention rate = 25%.

Use the following information to estimate a venture's sustainable growth rate: Net income = $200,000; Total assets = $1,000,000; equity multiple based...

If beginning of period common equity is $200,000 and end of period common equity is $300,000, the sustainable growth rate is:

If beginning of period common equity is $200,000 and end of period common equity is $300,000, the sustainable growth rate is: a. 33% b. 40% c. 50% d....

Which one of the following ratios is not part of the "standard" return on equity (ROE) model?

Which one of the following ratios is not part of the "standard" return on equity (ROE) model? a. net profit margin b. asset turnover c. equity multiplier d....

A sales growth rate based on the retention of profits is referred to as the:

A sales growth rate based on the retention of profits is referred to as the: a. real sales growth rate b. sustainable sales growth rate c. spontaneous...

A firm has net income of $320,000 on sales of $3,200,000. Its assets total $2,000,000; the equity at the beginning of the year was $1,600,000 and dividends paid were $80,000. What is the sustainable growth rate?

A firm has net income of $320,000 on sales of $3,200,000. Its assets total $2,000,000; the equity at the beginning of the year was $1,600,000 and dividends...

A firm projects net income to be $500,000, intends to pay out $125,000 in dividends, and had $2 million of equity at the beginning of the year. The firm's sustainable growth rate is:

A firm projects net income to be $500,000, intends to pay out $125,000 in dividends, and had $2 million of equity at the beginning of the year. The...

Which of the following is not part of the financial forecasting process used to project financial statements?

Which of the following is not part of the financial forecasting process used to project financial statements? a. forecast sales b. forecast tax rates c....

Internally generated funds which are available for distribution to owners of for reinvestment back into the business to support future growth can be characterized by which of the following?

Internally generated funds which are available for distribution to owners of for reinvestment back into the business to support future growth can be...

Which one of the following life cycle stages would generally be associated with the second lowest sales forecasting accuracy?

Which one of the following life cycle stages would generally be associated with the second lowest sales forecasting accuracy? a. early-maturity b....

Lola is in the process of forecasting the sales growth rate for an early-stage venture specializing in the production of durable running shoes. Lola predicts a .2 probability of an 80% growth in sales, a .3 probability of a 60% growth in sales, a .4 probability of a 40% growth in sales, and a .1 probability of a 10% decrease in sales. What is the expected sales growth rate of the venture?

Lola is in the process of forecasting the sales growth rate for an early-stage venture specializing in the production of durable running shoes. Lola...

An "expected value" is:

An "expected value" is: a. a simple average of a set of scenarios or possible outcomes b. a weighted average of a set of scenarios or possible outcomes c....

A "new" venture usually begins its sales forecast by first:

A "new" venture usually begins its sales forecast by first: a. forecasting industry sales and expressing the venture's sales as a percent of industry...

Public or seasoned financing is generally associated with which one of the following life cycle stages:

Public or seasoned financing is generally associated with which one of the following life cycle stages: a. development stage b. startup stage c....

During which life cycle stage is a venture typically most accurate in forecasting sales?

During which life cycle stage is a venture typically most accurate in forecasting sales? a. rapid growth stage b. startup stage c. development stage d....

During which round of financing is a venture typically most accurate in forecasting sales?

During which round of financing is a venture typically most accurate in forecasting sales? a. seasoned financing b. mezzanine financing c. first...

Which of the following statements is incorrect?

Which of the following statements is incorrect? a. forecasting sales is the first step in creating projected financial statements b. financial forecasting...

Which of the following is not a step in forecasting sales for a seasoned firm?

Which of the following is not a step in forecasting sales for a seasoned firm? a. forecast future growth rates based on possible scenarios and the...

An individual's work-related, non-financially compensated, contribution to the enhancement of a venture's value is referred to as:

An individual's work-related, non-financially compensated, contribution to the enhancement of a venture's value is referred to as: a. money equity b....

Estimate a venture's cash flow expected next year based on the following information: current year's net sales = $400,000; terminal value = $500,000; constant future growth rate = 10%; and venture investors' required rate of return = 20%.

Estimate a venture's cash flow expected next year based on the following information: current year's net sales = $400,000; terminal value = $500,000;...

Estimate a venture's terminal value based on the following information: current year's net sales = $500,000; next year's expected cash flow = $16,000; constant future growth rate = 10%; and venture investors' required rate of return = 20%.

Estimate a venture's terminal value based on the following information: current year's net sales = $500,000; next year's expected cash flow = $16,000;...

Which one of the following components is not a component of the equity valuation cash flow calculation?

Which one of the following components is not a component of the equity valuation cash flow calculation? a. net income b. depreciation and amortization...

Estimate a venture's constant growth rate (g) based on the following information: terminal value = $400,000; current year's net income = $20,000; next year's expected cash flow = $25,000; and a required rate of return of 20%.

Estimate a venture's constant growth rate (g) based on the following information: terminal value = $400,000; current year's net income = $20,000; next...

Estimate a venture's required rate of return based on the following information: terminal value = $400,000; current year's net income = $20,000; next year's expected cash flow = $25,000; and a constant growth rate = 7%.

Estimate a venture's required rate of return based on the following information: terminal value = $400,000; current year's net income = $20,000; next...

Estimate a venture's terminal value based on the following information: current year's net income = $20,000; next year's expected cash flow = $26,000; constant future growth rate = 7%; and venture investors' required rate of return = 20%.

Estimate a venture's terminal value based on the following information: current year's net income = $20,000; next year's expected cash flow = $26,000;...

Estimate a venture's equity valuation cash flow based on the following information: net income = $6,372; depreciation = $4,600; change in net operating working capital = $2,415; capital expenditures = $6,900; and new debt issues = $1,000.

Estimate a venture's equity valuation cash flow based on the following information: net income = $6,372; depreciation = $4,600; change in net operating...

The PDM equity valuation method is an abbreviation for:

The PDM equity valuation method is an abbreviation for: a. pseudo dividend method b. proximate dividend method c. pseudo discount method d. proximate...

The MDM equity valuation method is an abbreviation for:

The MDM equity valuation method is an abbreviation for: a. minimum dividend method b. maximum discount method c. maximum dividend method d. minimum...

To calculate a terminal value, one divides the next period's cash flow by the:

To calculate a terminal value, one divides the next period's cash flow by the: a. constant discount rate plus a constant growth rate b. constant discount...

What is the difference between pre-money valuation and post-money valuation?

What is the difference between pre-money valuation and post-money valuation? a. size of the capitalization rate b. amount of money injected by new...

Which one of the following components is not a component of the equity valuation cash flow?

Which one of the following components is not a component of the equity valuation cash flow? a. NOPAT b. depreciation and amortization expense c. change...

When estimating the terminal value of a cash flow perpetuity, which one of the following is not a component?

When estimating the terminal value of a cash flow perpetuity, which one of the following is not a component? a. the next period's cash flow b. a constant...

The purpose of the stepping stone year is?

The purpose of the stepping stone year is? a. to assure that there is sufficient required cash b. to assure that future dividends are constant c....

A venture's going-concern value is the:

A venture's going-concern value is the: a. present value of the expected future cash flows b. net present value of the current and expected future...

When estimating the terminal value of a venture using an equity valuation method, a perpetuity growth equation is often applied that uses the capitalization rate for discounting purposes. This "cap" rate is measured as the:

When estimating the terminal value of a venture using an equity valuation method, a perpetuity growth equation is often applied that uses the capitalization...

Which one of the following equity valuation methods records surplus cash on the balance sheet but assumes that the surplus cash is paid out over time for valuation purposes?

Which one of the following equity valuation methods records surplus cash on the balance sheet but assumes that the surplus cash is paid out over time...

Most discounted cash flow valuations involve using cash flows from an:

Most discounted cash flow valuations involve using cash flows from an: a. historical period, an explicit forecast period, and a terminal value b....

"Required cash" is?

"Required cash" is? a. the cash needed to pay interest expense b. a valuation method for early stage ventures c. cash needed to cover a venture's...

The pseudo dividend method is

The pseudo dividend method is a. the cleanest for valuing assets, but creates problems valuing surplus cash b. the cleanest for valuation purposes...

The maximum dividend method is

The maximum dividend method is a. the cleanest for valuing assets, but creates problems valuing surplus cash b. the cleanest for valuation purposes...

"Just in time" capital injections by equity investors is a reference to

"Just in time" capital injections by equity investors is a reference to a. sustainable growth b. the present value of the terminal value c. equity...

The equity valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash is called?

The equity valuation method involving zero explicitly forecasted dividends and an adjustment to working capital to strip surplus cash is called? a....

The equity valuation method involving explicitly forecasted dividends to provide surplus cash of zero is called?

The equity valuation method involving explicitly forecasted dividends to provide surplus cash of zero is called? a. maximum dividend method b. pseudo...

Your firm has been in business for two years. In its first year, the firm ended with $227,000 of current assets, long-term assets of $143,000, $70,000 in surplus cash, current liabilities of $52,000, and long-term assets of $68,000. At the end of the second year, current assets were $279,000, long-term assets of $195,000, surplus cash of $90,000, current liabilities of $62,000, and long-term assets of $78,000. What is your firm's change in net operating working capital?

Your firm has been in business for two years. In its first year, the firm ended with $227,000 of current assets, long-term assets of $143,000, $70,000...

In a wildly successful first year in business that started and ended with no required cash, your firm has operating income of $989,000, net income of $637,000, current assets of $900,000, current liabilities of $659,000, net capital expenditures were $690,000, and depreciation was $460,000. The firm has never financed itself with debt. What is your equity valuation cash flow?

In a wildly successful first year in business that started and ended with no required cash, your firm has operating income of $989,000, net income of...

Equity valuation cash flow = Net income plus

Equity valuation cash flow = Net income plus a. Depreciation and amortization expense minus the change in net operating working capital plus capital...

The calculation of equity valuation cash flows nets the cash impact of all other balance sheet and income accounts to focus on the ______ account as the repository of any remaining cash flow.

The calculation of equity valuation cash flows nets the cash impact of all other balance sheet and income accounts to focus on the ______ account as...

The present value of a set of future flows plus the current undiscounted flow is called?

The present value of a set of future flows plus the current undiscounted flow is called? a. going-concern value b. present value c. terminal value d....

The present value of the terminal value is called?

The present value of the terminal value is called? a. going-concern value b. present value c. terminal value d. reversion value e. net present value Answer: reversion...

The value of the venture at the end of the explicit forecast period is called the horizon value, or what?

The value of the venture at the end of the explicit forecast period is called the horizon value, or what? a. going-concern value b. present value c....

The value today of all future cash flows discounted to the present at the investor's required rate of return is called?

The value today of all future cash flows discounted to the present at the investor's required rate of return is called? a. going-concern value b....

The present value of the venture's expected future cash flows is called?

The present value of the venture's expected future cash flows is called? a. going-concern value b. present value c. terminal value d. reversion value e....

For the typical venture investing project, the valuation will be highest under:

For the typical venture investing project, the valuation will be highest under: a. DDA b. PDM and MDM c. VCSC d. initial book value of equity Answer: PDM...

The two "just-in-time" capital methods are:

The two "just-in-time" capital methods are: a. DDA and VCSC b. DDA and PDM c. VSCS and MDM d. MDM and PDM Answer: MDM and PD...

When a firm has growth that only meets, rather than exceeds, the cost of capital, we would expect its price-earnings multiple to be approximately equal to:

When a firm has growth that only meets, rather than exceeds, the cost of capital, we would expect its price-earnings multiple to be approximately equal...

Which of the following are components of the "mean" venture valuation approach?

Which of the following are components of the "mean" venture valuation approach? a. the present value of each outcome is calculated b. each outcome's...

Which of the following is not a variation of the venture capital valuation method?

Which of the following is not a variation of the venture capital valuation method? a. venture capital method b. expected present value c. utopian...

The utopian approach to valuation ignores which of the following venture scenarios:

The utopian approach to valuation ignores which of the following venture scenarios: a. black hole scenarios b. living dead scenarios c. both a and...

Which of the following financing rounds dilutes the ownership founders?

Which of the following financing rounds dilutes the ownership founders? a. first-round b. second-round c. incentive ownership round d. a and b e....

Determine the future value of a target venture which has net income expected to be $40,000 at the end of four years from now. A comparable firm currently has a stock price of $20.00 per shares; 100,000 shares outstanding; and net income of $50,000.

Determine the future value of a target venture which has net income expected to be $40,000 at the end of four years from now. A comparable firm currently...

Determine the net income of a "comparable" firm based on the following information: value of target firm = $4,000,000; net income of target firm = $200,000; stock price of "comparable" firm = $30.00; and 300,000 shares of stock outstanding for the comparable firm.

Determine the net income of a "comparable" firm based on the following information: value of target firm = $4,000,000; net income of target firm = $200,000;...

Determine the market value of a "comparable" firm based on the following information: value of target firm = $4,000,000; net income of target firm = $200,000; and net income of "comparable" firm = $500,000.

Determine the market value of a "comparable" firm based on the following information: value of target firm = $4,000,000; net income of target firm =...

Estimate the value of a privately-held firm based on the following information: total market value (or capitalization value) of a comparable firm = $200,000; net income of a comparable firm = $40,000; number of shares outstanding for the comparable firm = 20,000; net income for the target firm = $15,000; and number of shares outstanding for the target firm = 10,000.

Estimate the value of a privately-held firm based on the following information: total market value (or capitalization value) of a comparable firm =...

Estimate the value of a privately-held firm based on the following information: stock price of a comparable firm = $20.00; net income of a comparable firm = $20,000; number of shares outstanding for the comparable firm = 10,000; and earnings per share for the target firm = $3.00.

Estimate the value of a privately-held firm based on the following information: stock price of a comparable firm = $20.00; net income of a comparable...

A P/E multiple refers to:

A P/E multiple refers to: a. price/expectations multiple b. price/earnings multiple c. profit/EBIT multiple d. profit/earnings multiple e. price/EBITDA...

Suppose your venture's expected mean cash flows are $(85,000) initially, followed by expected mean cash flows at the end of the first, second, and third years of $40,000, $40,000, and $35,000. What is the internal rate of return?

Suppose your venture's expected mean cash flows are $(85,000) initially, followed by expected mean cash flows at the end of the first, second, and third...

During the exit period, which of the following will have last crack at the venture's wealth?

During the exit period, which of the following will have last crack at the venture's wealth? a. banks giving loans to the venture b. convertible debt...

For early stage ventures, which of the following is a strong reason for having an equity component in employee compensation?

For early stage ventures, which of the following is a strong reason for having an equity component in employee compensation? a. the expected deferred...

What is the value of the venture in year five using direct capitalization?

What is the value of the venture in year five using direct capitalization? a. $500,000 b. $5,000,000 c. $1,000,000 d. $100,000 Answer: $5,...

What is the post-money valuation?

What is the post-money valuation? a. $658,354 b. $499,954 c. $408,377 d. $249,977 Answer: $658,35...

What is the pre-money valuation?

What is the pre-money valuation? a. $120,300 b. $316,800 c. $158,400 d. $193,900 Answer: $158,40...

What is the issue price per share?

What is the issue price per share? a. $0.1939 b. $0.1203 c. $0.3168 d. $0.1584 Answer: $0.158...

What is the number of shares that must be issued to the new investor in order for the investor to earn his target return?

What is the number of shares that must be issued to the new investor in order for the investor to earn his target return? a. 3,156,276 b. 1,578,138 c....

What is the percent ownership of our venture that must be sold in order to provide the venture investor's target return?

What is the percent ownership of our venture that must be sold in order to provide the venture investor's target return? a. 33.33% b. 75.94% c. 12.76% d....

Financing provided in sequences of rounds rather than all at one time is known as?

Financing provided in sequences of rounds rather than all at one time is known as? a. pre-money valuation b. post money valuation c. staged financing d....

The value of the existing venture plus the proceeds from the potential new equity issue is known as?

The value of the existing venture plus the proceeds from the potential new equity issue is known as? a. pre-money valuation b. post money valuation c....

The value of the existing venture without the proceeds from the potential new equity issue is known as?

The value of the existing venture without the proceeds from the potential new equity issue is known as? a. pre-money valuation b. post money valuation c....

To obtain the percent ownership to be sold in order to expect to provide the venture investor's target return, one must consider the:

To obtain the percent ownership to be sold in order to expect to provide the venture investor's target return, one must consider the: a. cash investment...

The return to venture investors directly depends on which of the following?

The return to venture investors directly depends on which of the following? a. venture's ability to generate cash flows b. ability to convince an acquirer...

In a Venture Capital Fund Placement Memorandum, all of the following are included in the summary of terms except?

In a Venture Capital Fund Placement Memorandum, all of the following are included in the summary of terms except? a. indemnification b. objective c....

In a Venture Capital Fund Placement Memorandum, all of the following are part of the executive summary except?

In a Venture Capital Fund Placement Memorandum, all of the following are part of the executive summary except? a. special limited partners b. general...

In a Venture Capital Fund Placement Memorandum, which of the following is not part of the fund overview?

In a Venture Capital Fund Placement Memorandum, which of the following is not part of the fund overview? a. fund size b. investment focus c. fund...

In a Venture Capital Fund Placement Memorandum, which of the following is not part of the offering summary?

In a Venture Capital Fund Placement Memorandum, which of the following is not part of the offering summary? a. objective of formation b. declaration...

In a Venture Capital Fund Placement Memorandum, which of the following is not a front matter declaration?

In a Venture Capital Fund Placement Memorandum, which of the following is not a front matter declaration? a. description of limited manner of the offering b....

According to Figure 12.4 (Bloomberg, 2014), which of the following is the largest supplier of venture capital?

According to Figure 12.4 (Bloomberg, 2014), which of the following is the largest supplier of venture capital? a. financial and insurance b. public...

Which of the following is not one of the four likely outcomes of the venture firm's screening process?

Which of the following is not one of the four likely outcomes of the venture firm's screening process? a. seek the lead investor position b. seek...

When screening possible investments, a venture capital firm might issue an SLOR which stands for:

When screening possible investments, a venture capital firm might issue an SLOR which stands for: a. standard letter of rejection b. standing letter...

A summary of the investment terms and conditions accompanying an investment is referred to as a:

A summary of the investment terms and conditions accompanying an investment is referred to as a:  a. term sheet b. business plan c. fund created...

In a syndicate of venture investors, the investor who is responsible for governing the process of due diligence is:

In a syndicate of venture investors, the investor who is responsible for governing the process of due diligence is: a. the primary investor b. the...

Term sheets are usually drafted by:

Term sheets are usually drafted by: a. the mangers of the venture seeking VC funding b. the VC fund seeking to fund the venture c. management and...

All of the following are typical issues addressed in a term sheet except?

All of the following are typical issues addressed in a term sheet except? a. valuation b. board structure c. registration rights d. management fees e....

A venture fund calls upon its investors to deliver their investment funds. This is known as:

A venture fund calls upon its investors to deliver their investment funds. This is known as: a. due diligence b. deal flow c. a capital call d. carried...

If an investment management firm is known to be a "two and twenty shop", this implies that the firm:

If an investment management firm is known to be a "two and twenty shop", this implies that the firm: a. receives an annual 2% fee on invested capital,...

The term "carried interest" refers to:

The term "carried interest" refers to: a. interest not currently paid but which must be paid in the future by a professional venture capitalist b....

After determining the next fund's objectives and policies, the "professional venture investing cycle's" next step is:

After determining the next fund's objectives and policies, the "professional venture investing cycle's" next step is: a. solicit investments in new...

After a new professional venture capital fund is organized, the fund managers:

After a new professional venture capital fund is organized, the fund managers: a. conduct due diligence and actively invest b. solicit investments...

Professional venture investing usually involves setting up a venture capital firm as a:

Professional venture investing usually involves setting up a venture capital firm as a: a. proprietorship b. corporation c. partnership d. S corpo...

When screening prospective new ventures, venture capital firms must consider the nature of the proposed industry. Which of the following is not part of the screening of the proposed industry?

When screening prospective new ventures, venture capital firms must consider the nature of the proposed industry. Which of the following is not part...

When evaluating the prospects of a new venture, venture capital firms consider the characteristics of the entrepreneur and its team. Which of the following is not part of the review of the entrepreneur/team?

When evaluating the prospects of a new venture, venture capital firms consider the characteristics of the entrepreneur and its team. Which of the following...

When screening prospective new ventures, venture capital firms consider their own funds' requirements. Which of the following is not one of the venture firm's requirements relating to its own funds?

When screening prospective new ventures, venture capital firms consider their own funds' requirements. Which of the following is not one of the venture...

When evaluating the prospects of a new venture, venture capital firms consider which of the following?

When evaluating the prospects of a new venture, venture capital firms consider which of the following? a. characteristics of the proposal b. characteristics...

All of the following are typically part of a venture fund's typical compensation and incentive structure except:

All of the following are typically part of a venture fund's typical compensation and incentive structure except: a. some percent annual fee on invested...

As venture firms attract money from investors, it is placed in a fund. Important issues that must be put in place with the establishment of the fund include all of the following except:

As venture firms attract money from investors, it is placed in a fund. Important issues that must be put in place with the establishment of the fund...

Venture Capital firms tend to specialize in publicly identified niches because of the potential for value-added investing by venture capitalists. Which is not one of these niches?

Venture Capital firms tend to specialize in publicly identified niches because of the potential for value-added investing by venture capitalists. Which...

Which of the following was the largest source of venture capital funds in 2009 (as reported in Figure 12.4)?

Which of the following was the largest source of venture capital funds in 2009 (as reported in Figure 12.4)? a. pension funds and corporations b. individuals...

The beginning of professional venture capitalists is considered to have begun with the establishment or formation of:

The beginning of professional venture capitalists is considered to have begun with the establishment or formation of: a. Small Business Administration b....