Finance and risk management - international business - Practice Exam 5


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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