FIN 100 Quiz 7 With Answers(Already Graded A+)

1.  Which of these is a contractual commitment to loan the firm a certain maximum amount at a given interest rate?

Back-end loans

Loan commitment agreements

Take-down loans

Spot loans

2.  Which of these is defined as a professionally managed pool of money used to finance new and often high-risk firms?

Equity capital

Expertise capital

Debt capital

Venture capital

3.  A pro-rata distribution of additional shares of stock to the current owners of the stock is which of the following?

Ex-dividend

Payment date

Stock dividend

Stock split

4.  Which of these are the markets in which corporations raise funds through new stock issues?

Over the counter

Secondary

Commercial

→

Primary

5.  For most investors, the equalization of the tax rates on capital gains and dividends did which of the following?

Moved the real world closer to the concept of the dividend irrelevance theorem

Moved the real world further from the concept of the dividend indifference theory

Moved the real world further from the concept of the dividend irrelevance theorem

Moved the real world closer to the concept of the dividend indifference theory

6.  Which of the following is the primary goal of a firm?

Maximize sales

Maximize earnings per share

Maximize net income

Maximize shareholder wealth

7.  The Jobs and Growth Tax Relief Reconciliation Act of 2003 changed which of the following?

The general tax rate applicable to net capital gains for corporations

The general tax rate applicable to net capital gains for individuals

The general tax rate applicable to foreign corporations

The general tax rate applicable to corporations

8.  Which of the following is the type of financing that includes capital funds borrowed from personal savings, friends and relatives, financial institutions such as commercial banks, or venture capitalists?

Debt financing

Public financing

Equity financing

Capital financing

9.  Which of the following can be a benefit of the clientele effect?

If firms change their dividend policy, the investors who desire the previous policy will sell their shares.

If the firms change their dividend policy, the investors will be unaffected by the change due to the dividend irrelevance theorem.

If the firms change their dividend policy, it will maximize shareholder wealth.

New investors who were previously uninterested in the stock may be attracted to it because of a policy change.

10.  On the _____________, the firm will look on its books to find the registered owners so that they can start addressing payments.

record date

owner of record date

ex-dividend date

owner date

11.  Which of these is the idea that it does not matter whether a firm pays dividends or not as derived from a Modigliani and Miller Theorem?

Shareholder maximization theorem

Shareholder rationalization theorem

Dividend irrelevance theorem

Dividend indifference theory

12.  Which of the following statements is incorrect?

In a private placement, a public firm seeks to find a large institutional buyer or group of buyers to purchase the whole issue.

In a competitive sale, the bond-issuing firm invites bids from a number of underwriters.

In a negotiated sale, a single investment bank obtains the exclusive right to originate, underwrite and distribute the new bonds though a one-on-one negotiation process.

All of these statements are correct.

13.  Suppose a firm pays total dividends of $250,000 out of net income of $2 million. What would the firm's payout ratio be?

0.25

0.125

8.00

1.25

The payout ratio would be $250,000/$2,000,000 = 0.125.

14.  Regarding dividend payment procedures, which of the following is the date the firm would look on its books to find to whom they can start addressing payments?

Record date

Payment date

Ex-dividend date

Declaration date

15.  Which of these is the type of loan where the firm would receive the funds as soon as the bank approved the loan?

Back-end loans

Loan commitment agreements

Take-down loans

Spot loans

16.  Which of the following is true regarding he information effect of dividend policies?

If a firm announces an increase in the next dividend, analysts see such announcements as a very negative signal.

Increases in dividends are seen as negative signals concerning the firm's performance.

Increases in dividends are seen as negative signals concerning the firm's expected future cash flow levels.

If a firm announces an increase in the next dividend, analysts see such announcements as a very positive signal.

17.  Which of the following firms is more likely to use extraordinary dividends?

One with cyclical sales

One with stable sales

Firms with either cyclical or stable sales

Firms with neither cyclical nor stable sales

18.  Which of the following is the date the firm sends dividends out to the shareholders?

Record date

Declaration date

Ex-dividend date

Payment date

19.  Which of these is the fee charged by a bank on any unused balances of a loan commitment line at the end of the loan commitment period?

Discounted interest

Simple interest expense

Up-front (or facility) fees

Back-end (or commitment) fee

20.  GBH Inc. is planning on announcing a 2-for-5 stock split. The stock is currently trading at $12 per share. Based on this information, what will be the new stock price?

$27.00

$5.10

$4.80

$30.0