FNCE 3P93 Lecture Notes - Contingency Plan, Corporate Finance, Effective Interest Rate

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salmonchinchilla721

22 Nov 2012

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The sales price of the products is ,000. Montreal brewers must maintain a million credit line, on which it must pay a standby fee of 0. 2 percent. What is the commercial paper"s effective annual cost: habitant maple syrup sweets company just issued million of 180-day commercial paper for net proceeds of . 9 million. What is the commercial paper"s quoted yield: a. Calculate the effective annual cost of forgoing the discount of credit terms of 2/15 net 40. The selling price is : another supplier offers on credit terms of net 60. List a few forms of credit enhancement that are critical to spvs: suppose sio inc. has 60 days of accounts receivable (a/r) of ,000 on its books. A factor offers a 60-day a/r loan equal to 90 percent of a/r. The quoted interest rate is 8 percent, and there is a commission fee of 0. 5 percent.

Related Questions

1.Which one of the following is NOT involved in the process of issuing new finanial securities?

a) Securities and Exchange Commission(SEC)

b) Investos in the secondary markets

c) underwriting investment bank or syndicate

d) The firm

2. Which of the following statement is FALSE?

a) Bank requires the possibility of atleast one outcome less favorable than the expected value

b) probability distribution is described by a list of favorable and unfavorable events and their likelihood

c) Preferred stocks are less risky than common stocks because prefferes dividends are generally fixed

d) Standard deviation is a measure of market risk and, therefore is useful in evaluating the risk of a portofolio

3. Which one of the following statements is FALSE?

a) future value of an investment increases as the number of compund periods per year increases.

b) if you only earned interest on your initial investment, and not onpreviously earned interest, it would be called simple interest

c) present value of a future cash flow increases as the rate of return increases

d) time value of money is the opportunity cost of passing up he earning potential of a dollar today

4. Which of the following is NOT an example of an annuity?

a) interest received on a bond

b) monthly payments paid on a car loan

c) mortgage payments on a fixed-rate mortgage

d) dividend on a commo stock

5. All of the following are financial assets EXCEPT___________

a) Bankerâs acceptance

b) Preferred stock

c) Mortgage back security

d) Brand name

6. Which of the following statements is FALSE?

a) The value of a firm depends o the cash flows is expected to generate in the future

b) Current cash is more valuable than cash in the future

c) All else equal, certain cash flows are preferred to uncertain cash flows

d) The primay goal of a publicly-owed corporation is to maaximize dividend payments.

7. All of the following are the primary tools of the Federal Reserve âmonetary policyâ EXCEPT

a) The income tax rate

b) Open market operations

c) The required reserves

d) The short-term interest rate

8.Which of the following is NOT an advantage of going public or an initial public offering(IPO)?

a) Establish value for firm

b) Possible loss of control

c) Ease of raising funds later

d) Diversification for owners

9. All of the following ae an example of a financial intermediary,EXCEPT____________

a) Associated Credit Union of Texas

b) Canada Pension Plan(CPP)

c) Morgan Stanley investment bank

d)American Funds New Perspective Fund

ceriselizard402

1. Whenever there is a conflict between NPV and anotherdecision rule, you should always use NPV.

A. True

B. False

2. ________ finds one or more companies that specializein the product or service that we are considering.

A. The Objective Approach

B. The Pure Play Approach

C. The Subjective Approach

D. None of the above

3. The required return of bond is best estimated bycomputing the ________ on the bond.

A. Yield-to-maturity

B. market value

C. Risk

D. Both A and B

4. The return earned on assets depends on the ________of those assets.

A. Book value

B. Net book value

C. Risk

D. Liquidity

5. Which of the following is/are correct?

A. If the salvage value is the same as the book value of theasset, then there is a tax effect.

B. Book value = initial cost - accumulated depreciation

C. After-tax salvage = salvage - Tax Rate x (salvage - bookvalue)

D. Both B and C

6. ________ is the most important alternative to NetPresent Value.

A. IRR

B. Payback Method

C. Average Accounting Return

D. Discounted Payback

7. The mean difference between Payback and DiscountedPayback is:

A. Discounted Payback accounts for the time value of money andPayback does not

B. Discounted Payback accounts for the risk of the cash flowsand Payback does not

C. Only Payback does not provide an indication about theincrease in value

D. Both A and B

8. The ________ measures the time to get the initialcost back.

A. Internal Rate of Return

B. Net Present Value

C. Payback period

D. Profitability Index

9. Which of the following element/s should be consideredwhen evaluating capital budgeting decision rules?

A. Time value of money

B. Adjustment for risk

C. Creating value for the firm

D. All of the above

lilacsardine75

8. Which of the following events is likely to increase the value of put options on the common stock of GCC Company?

a)An increase in GCC's stock price.

b)A decrease in the exercise price of the option.

c)A decrease in the amount of time until the option expires.

d)A decrease in the risk-free rate.

9. Which of the following statements is CORRECT?

a) Futures contracts have less default risk because the exchange acts as the counterparty for all transactions

b) Forward contracts trade on an organized exchange and are marked to market daily.

c) Goods are never delivered under forward contracts, but are almost always delivered under futures contracts.

d) Forward contracts are available on individual stocks and futures contracts are for commodities.

10. Which statement is FALSE?

a)Interest Rate swaps often involve companies trading fixed rates for floating rates

b)Companies should always try to reduce risk whenever they can.

c)The coupon rate on Inverse Floaters goes up when interest rates fall

d) Credit Default Swaps pay off when a company goes bankrupt, thus they are like an insurance policy on bonds.

11. Which statement is CORRECT?

a)An option is out of the money if its exercise value is negative.

b)An option is in the money as long as the option price is positive.

c)The time value of an option is highest when the spot price equals the strike price.

d)Companies speculate on derivatives in order to reduce their risk.

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FNCE 3P93 Lecture Notes - Contingency Plan, Corporate Finance, Effective Interest Rate

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