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Corporate Issuers

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Mock Test 2 — Topic 4: Corporate Issuers

Kết quả: 4/13 (31%) Nguồn: SAPP CFA1 Revision Mock Test 2 Liên kết: Corporate Issuers

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Câu 32

Question 31: Other things equal, a company will have a shorter cash conversion cycle if its:

(A) payables turnover increases.

(B) inventory turnover decreases.

(C) receivables turnover increases.

Câu 38

Question 38: Which of the following statements is most accurate regarding the impact on a public company and its stakeholders from issuing additional equity rather than debt?

(A) The company must retire debt to fund the equity issuance.

(B) The additional shares will have an initial negative impact on earnings per share.

(C) The cost of capital for the new equity issuance will be lower than the cost of capital for debt.

Câu 39

Question 39: A project has an initial cash outflow of $100,000. The sum of the present values of its after-tax cash inflows is $105,000. Which of the following statements is most accurate regarding this project?

(A) It has a positive NPV at the discount rate used.

(B) Increasing the discount rate would increase its NPV.

(C) Net cash flows expected from this project are $5,000.

Câu 44

Question 44: Which of the following types of capital budgeting projects would typically require the most detailed analysis?

(A) Purchase of a new machine to increase production.

(B) Replacing a machine with a new one to maintain production.

(C) Purchase of a new machine to reduce materials waste and production costs.

Câu 47

Question 47: A company has an 11-member board of directors, an 18-member senior management team, and 650 individual shareholders. The principal-agent relationship in the company is between the:

(A) management as the principals and the shareholders as the agents.

(B) board of directors as the principals and the management team as the agents.

(C) shareholders as the principals and the board and management as the agents.

Câu 54

Question 54: A company is considering whether to allocate capital to a new product line. They estimate the project will require an initial cash outflow of $3 million. If the new product succeeds, they foresee a profitable opportunity to expand the project in three years, which would require a $3 million cash outflow. In evaluating the opportunity to introduce the new product line, how should the company most appropriately consider the opportunity to expand the project in the future?

(A) Include it and assign it a positive value.

(B) Not consider it in the capital allocation decision.

(C) Include a probability-weighted negative value for the possible future cash outflow.

Câu 61

Question 61: The audit committee of a company’s board of directors is most likely responsible for:

(A) developing the internal audit workplan for the year.

(B) determining the annual budget for the internal audit department.

(C) evaluating the effectiveness of the company’s internal audit department.

Câu 68

Quesiton 68: The Baker Company is evaluating several projects brought forth by its management team. One of the projects requires a $70,000 initial investment and has a forecast NPV of $35,000. If the required rate of return for the project is 6.25%, Baker should:

(A) accept the project because its IRR exceeds 6.25%.

(B) reject the project because its forecast NPV is below the initial investment required.

(C) reject the project because the initial investment will cause the IRR to be below 6.25%.

Câu 72

Question 72: One of the primary reasons why issuing debt is challenging for a start-up company is that its:

(A) cash flow tends to be stable or growing slowly.

(B) assets available to be used as collateral are limited.

(C) sales and operating earnings are likely to be negative.

Câu 76

Question 76: A higher debt-to equity ratio may lead to a higher weighted average cost of capital because:

(A) adding debt increases the risk of financial distress.

(B) the cost of debt is typically greater than the cost of equity.

(C) interest payments are only tax deductible up to a threshold.

Câu 82

Question 82: Summit Industries targets a debt-to-equity ratio of 0.33. Its after-tax cost of equity is 13% and its after-tax cost of debt is 5%. The most appropriate estimate for Summit’s WACC is:

(A) 10.2%.

(B) 10.7%.

(C) 11.0%.

Câu 87

Question 87: A manager is evaluating a potential capital investment project. Which of the following statements is most accurate regarding the evaluation process?

(A) Inflows are more valuable the later in the project’s life they are received.

(B) The manager can acceptably use either net income or after-tax cash flows.

(C) The focus should be on incremental cash flows rather than overall cash flows.

Câu 88

Question 88: A company has estimated the installed cost of a new machine to be $1.5 million. The machine is expected to increase after-tax cash flows by $600,000 in each of the next three years and by $300,000 for two years after that. After five years the machine will be removed and disposed of at a cost of $200,000. If the firm uses a discount rate of 9% for evaluating capital projects, its estimate of the NPV of the proposed investment will be closest to:

(A) $283,000.

(B) $296,000.

(C) $307,000.

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