Corporate Finance - Mock Exam.docx

Corporate Finance
Mock Final Exam
Duration: 90 minutes
I.
Trắc nghiệm:
Câu 1: Which one of the following terms is defined as one minus the dividends paid expressed as
a percentage of net income?
A. Dividend payout ratio
B. Net profit margin
C. Gross margin
D. Plowback ratio
Câu 2: The goal of financial management is to maximize the ……….
A. the current value per share of the existing stock.
B. the book value per share of the existing stock.
C. the market value of the dividend per share.
D. the future value of the fixed assets.
Câu 3: Which one of the following is NOT a decision function of financial management?
A. capital structure
B. working capital management
C. long-term capital management
D. capital budgeting
Câu 4: Rank the liquidity of the following assets from the lowest to the highest:
A. Inventory, account receivable, cash, equipment
B. Building, account receivable, Equipment, cash
C. Equipment, account receivable, cash, inventory
D. Building, inventory, account receivable, cash
Câu 5: Given the price-per-earnings (P/E) ratio of, approximatelly, 15. What would be Pfizer’s
earnings per share (EPS) if it’s stock price at the end of last year was $48?
A. 3.8
B. 4.50
C. 3.4

D. 3.2
Câu 6: Which of the following is an NOT example of operating expense?
A. Administrative expenses.
B. Salaries and wage.
C. Sales and marketing fees.
D. Capital expenses.
Câu 7: Company A's dividend is expected to grow by 6% per year, lasting indefinitely.
Determine the dividend paid last year if the discount rate is 16% and the value of the stock is
$21.20.


A.
B.
C.
D.

$3.2
$2.8
$2.2
$2.0

Câu 8: Which one of the following accurately defines an ordinary annuity?
A. A series of increasing payments paid for a definitive period of time.
B. A series of constant or level cash flows that occur at the beginning of each period for some
fixed number of period.
C. A series of constant or level cash flows and the cash flows continue forever.
D. A series of constant or level cash flows that occur at the end of each period for some fixed
number of period
Câu 9: What is the future value of $10,500 invested for 8 years at 10% compounded annually?
A. $22,483.60

B. $27,890.17
C. $22,507.68
D. $32,209.33
Câu 10: What is one reason that make shareholders reluctant to issue new equity?
A. New equity often changes the ownership of the firm.
B. New debt often leads to dilution in firm’s ownership.
C. Debt is normally much more expensive than new equity.
D. None of the above.
Câu 11: Highland Coffee’s dividend is expected to grow at 20% for the next five years. After
that, the growth is expected to be 4% forever. What is the case of this dividend growth model?
A. Zero growth
B. Constant growth
C. Two-stage growth
D. Normal growth
Câu 12: Which of the following is a disadvantage of the net present value (NPV) method?
A. It does not take into account cash flows over a project’s full life.
B. It does not take into account the time value of money.
C. It does not indicate a link between the investment amount and the profitability
D. The net present value method does not have any disadvantages
Câu 13: Which of the following factors do NOT influence the capital investment cash flows of a
project .......
A.
B.
C.
D.

The market research expense of the project.
The current price of the machine needed for the project.
The change in corporate tax rate.
The change in the price of the materials needed fot the project.

Câu 14: What are the conditions that make both IRR and NPV yield the same result?
I. The weighted average cost of capital of the project is higher than its IRR
II. The project is a mutually exclusive with another project
III. The project is an independent project
IV. The project has a normal cash flow
A. I, III
B. II, IV
C. I, IV
D. III, IV
Câu 15: Mei Mei Corporation has just paid a dividend of $3 per share. The dividend of this
company grows at a steady rate of 8 % per year and the appropriate discount rate is 15%. Based
on this information, what will the stock price of Mei Mei Corporation be in five years?.
A. $60.50
B. $68.04
C. $73.06
D. $78.05
Câu 16: A firm had an operating cash flow (OCF) of $50,500. The firm spent $34,000 on fixed
assets and increased net working capital by $2,400. Cash flow to creditors is $4,500. What is the
amount of the cash flow to shareholders?
A. $15,300
B. $13,400
C. $11,200
D. $9,600
Câu 17: A company has a cost of equity (Ke) of 18% and an after-tax cost of debt (Kd x (1-T))
of 6%. It has 40% debt in its capital structure. It has two investment opportunities of similar risk
to its existing business. Project A will yield 9% and project B will yield 15% and be financed by
equity. Given that the company apply the same capital structure to all of its projects. The
company should …

A. Accept A alone.
B. Accept B alone.
C. Accept both projects.
D. Accept neither project.
Câu 18: The CFO of ABC Corporation prepare the following table to report to the CEO on the
outlook of the company investment portfolio.

What would be the expected return if half of the portfolio were in A, with the remainder equally
divided between B and C?


A.
B.
C.
D.
II.

10.3%
9.4%
8.5%
7.7%
Tự luận:

1. ABC Company has identified the following two mutually exclusive projects:

a. If the discount rate is 13 %, what is the NPV for project B? Which project will the
company choose if it applies the NPV decision rule?
b. Calculate the payback period for project B. If the required payback period is 2.5 years,
which project will the company choose?
2. A bank offers you two payment options. You could have $95,000 per year for the next two

years, or you could have $70,000 per year for the next two years, plus a $45,000 bonus today.
Bonuses are paid immediately and salaries are paid at the end of each year. If the interest rate
is 10% compounded annualy, which option would you prefer?
3. Song Lam Company has a revenue of $27,500, operating expenses of $13,800, depreciation
expense of $2,300 and interest expense of $1,100. If the tax rate is 25%, what is the operating
cash flow (OCF) of this company?
4. You are working for Company A and it is currently using payback period (PBP) to decide
whether to accept or reject a project. What would you say to convince your manager to swith
to NPV instead?
5. Explain the liquidity of a business. What problems will businesses face in the case of high
liquidity? Where there is low liquidity?
6. LNG Inc., has an equity multiplier (EM) of 2.2, total asset turnover (ATO) of 1.35. What is
the target profit margin (PM) LNG Inc., should aim for if it wants to maintain the current
return on equity (ROE) of 62.37%?