Essay about Fi516 Final Exam Study Guide

1364 Words May 10th, 2013 6 Pages
WK 8 FINAL EXAM STUDY GUIDE • The exam is comprehensive and covers Chapters 8, 14, 15, 17-23, 25, and 26; Weeks 1-7 content; and all course TCOs. 1. (TCO B) Which of the following statements concerning the MM extension with growth is NOT CORRECT? (a) The tax shields should be discounted at the unlevered cost of equity. (b) The value of a growing tax shield is greater than the value of a constant tax shield. (c) For a given D/S, the levered cost of equity is greater than the levered cost of equity under MM's original (with tax) assumptions. (d) For a given D/S, the WACC is greater than the WACC under MM's original (with tax) assumptions. (e) The total value of the firm is independent of …show more content…
(b) The company's earnings per share would decline.
(c) The company's cost of equity would increase.
(d) The company's ROA would increase.
(e) The company's ROE would decline. (Points : 20)

4. (TCO G) Which of the following statements is most CORRECT? (a) The primary test of feasibility in a reorganization is whether every claimant agrees with the reorganization plan.
(b) The basic doctrine of fairness states that all debtholders must be treated equally.
(c) Since the primary issue in bankruptcy is to determine the sharing of losses between owners and creditors, the "public interest" is not a relevant concern.
(d) While a firm is in bankruptcy, the existing management is always allowed to retain control, though the court will monitor its actions closely.
(e) To a large extent, the decision to dissolve a firm through liquidation versus keeping it alive through reorganization depends on a determination of the value of the firm if it is rehabilitated versus the value of its assets if they are sold off individually. (Points : 20)

|1. (TCO I) In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the same |
|amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be selling for today in U.S. dollars?|

Related Documents