VIC159H1 Lecture Notes - Lecture 8: Lucretius, Theism, Atomism

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byzantiumreindeer294

3 May 2016

School

UTSG

Department

Victoria College Courses

Course

VIC159H1

Professor

Yiftach Fehige

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Document Summary

Difference between cusa and the atomists is that the cusan universe is not infinite, but also not finite. This is a major difference from lucretius, whose gods are finite beings that have nothing to do with creation or governance of the world (cusa was a christian/classical theist) Cusa distinguishes between negative infinite - has no limit, and privative infinite - should naturally have limits, but lacks them. According to cusa, god is a negative infinite, and the universe is a privative infinite. Another terminology used by cusa is that god is the absolute infinite, and the universe is a. Cusa claims that because god, who is eternity itself, couldn"t be made, the universe was what could be made (during god"s conscious decision of creation), and the universe is made as much like god as possible. The universe is the physical (and temporal?) expression of the divine unfolding.

Related Questions

QUESTION 1

In the lease versus buy decision, leasing is often preferable

	A.	because the lessee owns the property at the end of the least term.
	B.	because lease obligations do not affect the firm's risk as seen by investors.
	C.	because, generally, no down payment is required, and there are no indirect interest costs.
	D.	because it has no effect on the firm's ability to borrow to make other investments.
	E.	because the lessee may have greater flexibility in abandoning the project in which the leased property is used than if the lessee bought and owned the asset.

2 points

QUESTION 2

The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation.

True

False

2 points

QUESTION 3

Ratio analysis involves analyzing financial statements in order to appraise a firm's financial position and strength.

True

False

2 points

QUESTION 4

Which of the following statements is CORRECT?

	A.	If the returns on two stocks are perfectly positively correlated (i.e., the correlation coefficient is +1.0) and these stocks have identical standard deviations, an equally weighted portfolio of the two stocks will have a standard deviation that is less than that of the individual stocks.
	B.	If a stock has a negative beta, its expected return must be negative.
	C.	A portfolio with a large number of randomly selected stocks would have less market risk than a single stock that has a beta of 0.5.
	D.	According to the CAPM, stocks with higher standard deviations of returns must also have higher expected returns.
	E.	A portfolio with a large number of randomly selected stocks would have more market risk than a single stock that has a beta of 0.5, assuming that the stock's beta was correctly calculated and is stable.

2 points

QUESTION 5

Many leases written today combine the features of operating and financial leases. Such leases are often called "combination leases."

True

False

2 points

QUESTION 6

The owner of a convertible bond owns, in effect, both a bond and a call option.

True

False

2 points

QUESTION 7

If a firm raises capital by selling new bonds, it is called the "issuing firm," and the coupon rate is generally set equal to the required rate on bonds of equal risk.

True

False

2 points

QUESTION 8

Which of the following statements is most CORRECT?

	A.	Warrants can sometimes be detached and traded separately from the debt with which they were issued, but this is unusual.
	B.	One important difference between warrants and convertibles is that convertibles bring in additional funds when they are converted, but exercising warrants does not bring in any additional funds.
	C.	The coupon rate on convertible debt is normally set below the coupon rate that would be set on otherwise similar straight debt even though investing in convertibles is more risky than investing in straight debt.
	D.	Warrants have an option feature but convertibles do not.
	E.	The value of a warrant to buy a safe, stable stock should exceed the value of a warrant to buy a risky, volatile stock, other things held constant.

2 points

QUESTION 9

Because of improvements in forecasting techniques, estimating the cash flows associated with a project has become the easiest step in the capital budgeting process.

True

False

2 points

QUESTION 10

The form of organization for a business is not an important issue, as this decision has very little effect on the income and wealth of the firm's owners.

True

False

2 points

QUESTION 11

Two important issues in corporate governance are (1) the rules that cover the board's ability to fire the CEO and (2) the rules that cover the CEO's ability to remove members of the board.

True

False

2 points

QUESTION 12

The "preferred" feature of preferred stock means that it normally will provide a higher expected return than will common stock.

True

False

2 points

QUESTION 13

If an investment project would make use of land which the firm currently owns, the project should be charged with the opportunity cost of the land.

True

False

2 points

QUESTION 14

Operating leases help to shift the risk of obsolescence from the user to the lessor.

True

False

2 points

QUESTION 15

Starting to invest early for retirement increases the benefits of compound interest.

True

False

2 points

QUESTION 16

Market risk refers to the tendency of a stock to move with the general stock market. A stock with above-average market risk will tend to be more volatile than an average stock, and its beta will be greater than 1.0.

True

False

2 points

QUESTION 17

Other things held constant, an increase in the cost of capital will result in a decrease in a project's IRR.

True

False

2 points

QUESTION 18

An option is a contract that gives its holder the right to buy or sell an asset at a predetermined price within a specified period of time.

True

False

2 points

QUESTION 19

The optimal distribution policy strikes that balance between current dividends and capital gains that maximizes the firm's stock price.

True

False

2 points

QUESTION 20

If the current price of a stock is below the strike price, then an option to buy the stock is worthless and will have a zero value.

True

False

2 points

QUESTION 21

The desire for floating-rate bonds, and consequently their increased usage, arose out of the experience of the early 1980s, when inflation pushed interest rates up to very high levels and thus caused sharp declines in the prices of outstanding bonds.

True

False

2 points

QUESTION 22

Taylor Inc. estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?

	A.	Project C, which is of above-average risk and has a return of 11%.
	B.	Project A, which is of average risk and has a return of 9%.
	C.	None of the projects should be accepted.
	D.	All of the projects should be accepted.
	E.	Project B, which is of below-average risk and has a return of 8.5%.

2 points

QUESTION 23

To finance the construction of a new plant, Pietersen Corporation must raise an additional $10,000,000 of equity capital through the sale of common stock. The firm currently has an EPS of $5.40 and a P/E ratio of 10, with 1,200,000 shares outstanding. If the firm wants its ex-rights price to be $50, what subscription price must it set on the new shares?

	A.	$39.28
	B.	$50.00
	C.	$29.55
	D.	$41.80
	E.	$33.78

2 points

QUESTION 24

Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?

	A.	A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage.
	B.	A bank loan's nominal interest rate will always be equal to or less than its effective annual rate.
	C.	The present value of a 5-year, $250 annuity due will be lower than the PV of a similar ordinary annuity.
	D.	If an investment pays 10% interest, compounded annually, its effective annual rate will be less than 10%.
	E.	Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually. Deposits in Bank B will provide the higher future value if you leave your funds on deposit.

2 points

QUESTION 25

Which of the following statements is CORRECT?

	A.	In the statement of cash flows, a decrease in inventories is reported as a use of cash.
	B.	In the statement of cash flows, a decrease in accounts receivable is reported as a use of cash.
	C.	In the statement of cash flows, depreciation charges are reported as a use of cash.
	D.	In the statement of cash flows, a decrease in accounts payable is reported as a use of cash.
	E.	Dividends do not show up in the statement of cash flows because dividends are considered to be a financing activity, not an operating activity.

2 points

QUESTION 26

The term "additional funds needed (AFN)" is generally defined as follows:

	A.	A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant.
	B.	Funds that are obtained automatically from routine business transactions.
	C.	Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations.
	D.	The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.
	E.	The amount of assets required per dollar of sales.

2 points

QUESTION 27

The cash flows associated with common stock are more difficult to estimate than those related to bonds because stock has a residual claim against the company versus a contractual obligation for a bond.

True

False

2 points

QUESTION 28

Which of the following statements is CORRECT?

	A.	The NPV method automatically deals correctly with externalities, even if the externalities are not specifically identified, but the IRR method does not. This is another reason to favor the NPV.
	B.	Identifying an externality can never lead to an increase in the calculated NPV.
	C.	Both the NPV and IRR methods deal correctly with externalities, even if the externalities are not specifically identified. However, the payback method does not.
	D.	An example of an externality is a situation where a bank opens a new office, and that new office causes deposits in the bank's other offices to increase.
	E.	An externality is a situation where a project would have an adverse effect on some other part of the firm's overall operations. If the project would have a favorable effect on other operations, then this is not an externality.

2 points

QUESTION 29

Time lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.

True

False

2 points

QUESTION 30

A warrant is an option, and as such it cannot be used as a "sweetener."

True

False

2 points

QUESTION 31

BLW Corporation is considering the terms to be set on the options it plans to issue to its executives. Which of the following actions would decrease the value of the options, other things held constant?

	A.	The life of the option is increased, i.e., the time until it expires is lengthened.
	B.	The exercise price of the option is increased.
	C.	The Federal Reserve takes actions that increase the risk-free rate.
	D.	BLW's stock price becomes more risky (higher variance).
	E.	BLW's stock price suddenly increases.

2 points

QUESTION 32

Convertible debentures for Kulik Corporation were issued at their $1,000 par value in 2012. At any time prior to maturity on February 1, 2032, a debenture holder can exchange a bond for 25 shares of common stock. What is the conversion price, Pc?

	A.	$48.62
	B.	$40.00
	C.	$42.00
	D.	$46.31
	E.	$44.10

2 points

QUESTION 33

A stock is expected to pay a dividend of $0.75 at the end of the year. The required rate of return is rs = 10.5%, and the expected constant growth rate is g = 6.4%. What is the stock's current price?

	A.	$18.29
	B.	$17.39
	C.	$19.22
	D.	$18.75
	E.	$17.84

2 points

QUESTION 34

If a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus shareholders' wealth.

True

False

2 points

QUESTION 35

The common stock of Southern Airlines currently sells for $33, and its 8% convertible debentures (issued at par, or $1,000) sell for $850. Each debenture can be converted into 25 shares of common stock at any time before 2025. What is the conversion value of the bond?

	A.	$783.75
	B.	$744.56
	C.	$825.00
	D.	$866.25
	E.	$707.33

2 points

QUESTION 36

Which of the following statements is CORRECT?

	A.	If interest rates increase, the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond.
	B.	If a bond's yield to maturity exceeds its annual coupon, then the bond will trade at a premium.
	C.	If a coupon bond is selling at par, its current yield equals its yield to maturity.
	D.	If a coupon bond is selling at a premium, its current yield equals its yield to maturity.
	E.	If a coupon bond is selling at a discount, its price will continue to decline until it reaches its par value at maturity.

2 points

QUESTION 37

A proxy is a document giving one party the authority to act for another party, including the power to vote shares of common stock. Proxies can be important tools relating to control of firms.

True

False

2 points

QUESTION 38

Projects S and L are equally risky, mutually exclusive, and have normal cash flows. Project S has an IRR of 15%, while Project L's IRR is 12%. The two projects have the same NPV when the WACC is 7%. Which of the following statements is CORRECT?

	A.	Project S's NPV is more sensitive to changes in WACC than Project L's.
	B.	If the WACC is 13%, Project S will have the lower NPV.
	C.	If the WACC is 6%, Project S will have the higher NPV.
	D.	If the WACC is 10%, both projects will have positive NPVs.
	E.	If the WACC is 10%, both projects will have a negative NPV.

2 points

QUESTION 39

A firm's AFN must come from external sources. Typical sources include short-term bank loans, long-term bonds, preferred stock, and common stock.

True

False

2 points

QUESTION 40

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

	A.	Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership.
	B.	Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization.
	C.	Corporations generally find it relatively difficult to raise large amounts of capital.
	D.	Corporations generally face relatively few regulations.
	E.	Corporate investors are exposed to unlimited liability.

2 points

QUESTION 41

The cost of debt is equal to one minus the marginal tax rate multiplied by the average coupon rate on all outstanding debt.

True

False

2 points

QUESTION 42

Amram Company's current ratio is 1.9. Considered alone, which of the following actions would reduce the company's current ratio?

	A.	Use cash to reduce accruals.
	B.	Borrow using short-term notes payable and use the proceeds to reduce long-term debt.
	C.	Use cash to reduce accounts payable.
	D.	Borrow using short-term notes payable and use the proceeds to reduce accruals.
	E.	Use cash to reduce short-term notes payable.

2 points

QUESTION 43

ESOPs were originally designed to help improve worker productivity, but today they are also used to help prevent hostile takeovers.

True

False

2 points

QUESTION 44

High current and quick ratios always indicate that a firm is managing its liquidity position well.

True

False

2 points

QUESTION 45

A firm should never accept a project if its acceptance would lead to an increase in the firm's cost of capital (its WACC).

True

False

2 points

QUESTION 46

"Capital" is sometimes defined as funds supplied to a firm by investors.

True

False

2 points

QUESTION 47

Heavy use of off-balance sheet lease financing will tend to

	A.	affect a company's cash flows but not its degree of risk.
	B.	make a company appear less risky than it actually is because its stated debt ratio will appear lower.
	C.	make a company appear more risky than it actually is because its stated debt ratio will be increased.
	D.	affect the lessee's cash flows but only due to tax effects.
	E.	have no effect on either cash flows or risk because the cash flows are already reflected in the income statement.

2 points

QUESTION 48

As a firm's sales grow, its current assets also tend to increase. For instance, as sales increase, the firm's inventories generally increase, and purchases of inventories result in more accounts payable. Thus, spontaneous liabilities that reduce AFN arise from transactions brought on by sales increases.

True

False

2 points

QUESTION 49

On the balance sheet, total assets must always equal total liabilities and equity.

True

False

2 points

QUESTION 50

The annual report contains four basic financial statements: the income statement, balance sheet, statement of cash flows, and statement of stockholders' equity.

True

False

Case Study 1: Case Presentation

John, a healthy twenty-eight year old electrical engineer, was driving home from work one evening when he experienced sudden stabbing pain in his right pectoral and right lateral axillary regions. He began to feel out of breath and both his respiratory rate and heart rate increased dramatically. As luck would have it, John passed a hospital each day on his way home and was able to get himself to the hospitalâs emergency room. The emergency room physician listened to Johnâs breathing with a stethoscope and requested blood gas analysis and a chest x-ray. John answered a few of the doctorâs questions. The doctor noted that John had no history of respiratory problems but was a heavy smoker.

After viewing the chest radiograph, the doctor informed John that he had experienced a spontaneous pneumothorax, or what is commonly called a collapsed lung. The doctor explained that a hole had opened in Johnâs right lung and that this hole had allowed air to leak into the cavity surrounding the lung. Then, as a result of the lungâs own elastic nature, the lung had collapsed. The doctor said he could not be certain of the cause of the pneumothorax, but smoking cigarettes had certainly increased the likelihood of it happening. He told John he was fortunate the pneumothorax was small, which meant that relatively little air had escaped from the lung into the surrounding cavity, and it should heal on its own. He instructed John to quit smoking, avoid high altitudes, flying in nonpressurized aircraft, and scuba diving. He also had John make an appointment for a re-check and another chest x-ray.

Case Background

Spontaneous pneumothorax occurs when a blister on the surface of the lung opens, allowing air from the lung to move into the pleural cavity. This occurs because alveolar pressure is normally greater than the pressure in the pleural cavity. As air escapes from the lung, the lung tissues will recoil, and the lung will begin to collapse. The lung will continue to collapse until the difference between the alveolar pressure and pleural pressure disappears or until the collapsing of the lung causes the opening to seal.

The pneumothorax decreases the efficiency of the respiratory system, which in turn results in decreased blood oxygen concentration, increased respiratory rate, and increased heart rate. If the pneumothorax is small, the air that escapes into the pleural cavity can be reabsorbed into the lung once the opening has sealed shut. If the pneumothorax is large, a needle or chest tube may have to be inserted into the pleural cavity to draw the air out and allow for the reexpansion of the lung.

Questions

Define the following terms and explain how they may have been affected by Johnâs spontaneous pneumothorax.

Visceral pleura

Parietal pleura

Pleural cavity

As a result of a pneumothorax, the lung tissues recoil, and the lung collapses. Explain how recoil and collapse are prevented in a healthy lung?

How does elastic recoil function in breathing?

Why was John instructed to avoid high altitudes and flying in nonpressurized aircraft?

Case Study 2: The Case of the Coughing Housewife

Jessica, a fifty-nine year old mother of four, moved from a ranch in Colorado to Los Angeles, after the death of her husband, to be closer to her oldest son and his family. She has been in Los Angeles for 18 months and has noticed that she is experiencing shortness of breath which has worsened over the last six months. For the last week, she has been coughing and bringing up yellow mucus. She also noticed swelling in her ankles so she decided to visit a physician about her condition.

Jessica's family and medical history include a negative history of asthma or allergies, lack of occupational or home exposure to asbestos, a previous smoking history (one package of cigarettes per day between the ages of 16 and 52), episodes of bronchitis, treated with antibiotics on an outpatient basis, and a positive history of heart disease (father at 52 and brother at 56). Jessica has no history of serious illness, including heart disease, and her weight is within five pounds of her "desired" weight. She usually coughs in the morning to "clear her throat", but there is usually only a small amount of white mucus.

Her nurse practitioner conducts a general physical examination with the following results. Jessica's skin is normal (no rashes or cyanosis) and her nervous system is functioning normally. Her body temperature was 98.4oF while her pulse was regular at 95 beats per minute with an occasional premature beat. Jessica's blood pressure was within normal limits, however her jugular veins were slightly distended. Her respiratory rate was 28 breaths per minute; she breathed with pursed lips and used her accessory respiratory muscles more than would be expected. Jessica presented with a barrel chest and mild dyspnea when climbing onto the examination table. When listening to her breathing, the nurse practitioner noticed that Jessica had prolonged expiration accompanied by expiratory wheezes. Evaluation of her abdomen indicated no masses or tenderness, but she presented with both hepatomegaly and splenomegaly. All of her extremities were normal with the exception of bilaterally pedal edema.

Based on these results, the nurse practitioner suspected a pulmonary disorder and, after consultation with a physician, ordered laboratory tests (blood and sputum), spirometry and chest x-rays. The results of the laboratory tests were as follows: plasma bicarbonate = 38 mEq/L, hematocrit = 49%, white blood cell count = 9000, pH = 7.38; PaCO2 = 56, and PaO2 = 54. Analysis of the sputum sample indicated the presence of epithelial cells, polymorphonucleocytes and gram positive diplococci. Jessica's 1 second forced expiratory volume (FEV1) was 1.5 L/sec and her forced vital capacity (FVC) was 4 L. These values were 40% and 83% of normal, respectively. Results of the chest x-ray indicated scarring and hyperinflation of the lungs.

The results of these tests coupled with the physical examination and history lead to a diagnosis of emphysema. Jessica was prescribed antibiotics for the infection and oxygen by nose as well as a b2-agonist nebulizer as an acute treatment and requested to stay for observation and stabilization. After Jessica's condition was stabilized she was discharged and given a prescription for an inhaler containing a b2-agonist to be used as needed. She was also encouraged to exercise regularly and follow the nutritional guidelines she was given. Jessica was also informed that if the symptoms either worsened or did not lessen within the next week, to return and her treatment would be reevaluated and would possibly include nocturnal oxygen and an inhaler containing corticosteroids.

Answer the following questions about this case

Define the bold terms in the text. (8 points)

What risk factors and symptoms did Jessica present with prior to the physical examination that suggested a pulmonary disorder?

How did the physical examination, chest X-ray and spirometry confirm this hypothesis?

Identify muscles involved in respiration and how these muscles are responsible for the process of ventilation.

How will the b2-agonist in the inhaler help with the respiratory problems Jessica presents with?

Why is it important that a b2-agonist and not simply an b-agonist is used in the inhaler?

If her condition does not progress, why would corticosteroids be used in the inhaler?

VIC159H1 Lecture Notes - Lecture 8: Lucretius, Theism, Atomism

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