Finance and risk management - international business - Practice Exam 5

## MC-questions

### Question 1

The four stocks A, B, C, and D have standard deviations, respectively, of 5%, 10%, 15% and 20%. Which one is the riskiest?

1. Stock A
2. Stock B
3. Stock C
4. Stock D

### Question 2

According to the Pecking Order Hypothesis: less probable companies in an asymmetric world will need more ________; they will first seek ________ and will avoid ________.

1. internal funding; the use of retained earnings; equity market
2. internal funding; the use of retained earnings; debt market
3. external funding; equity funding; debt market
4. external funding; debt financing; equity market

### Question 3

Consider the following sales:

• May: €50,000
• June: €80,000
• July: €120,000

For any month the following percentages are received over time in cash: 40% in cash from that same month of sales, 50% in cash from the previous month's sales and 10% in cash from the sales from two months ago. What amount of cash will be received during July?

1. €93,000
2. €97,500
3. €108,000
4. €120,000

### Question 4

Which model shows how soon one will recover from an initial investment?

1. Payback period
2. NPV
3. IRR
4. Profitability index

### Question 5

Consider the following information from a balance sheet: the value of common stock is €60,000, preferred stock has a value of €10,000, retained earnings are €40,000, long-term debt is €120,000. For the purpose of estimating the WACC of the firm,what are the weights of long-term debt, preferred stock and equity? (Note: D = debt, PS= preferred stock, E = equity and V = total value).

1. D/V = 52.17%, PS/V = 4.35% and E/V = 43.48%
2. D/V = 52.17%, PS/V = 43.48% and E/V = 4.35%
3. D/V = €120,000, PS/V = €10,000 and E/V = €100,000
4. There is not enough information to answer this question.

### Question 6

Which of the following types of securities cannot be issued by a large public firm?

1. common stock
2. bonds
3. preferred stock
4. t-bills

### Question 7

A company that offers a credit discount to its customers is trying to ________, and a company that pays a credit in time rather than take a discount... Interested? Read the instructions below in order to read the full content of this page.

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