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FIN 534 Entire Course

• FIN 534 Week 1 Chapter 1 Solution
• FIN 534 Week 1 Chapter 2 Solution
• FIN 534 Week 2 Chapter 3 Solution
• FIN 534 Week 3 Chapter 4 Solution
• FIN 534 Week 3 Chapter 5 Solution
• FIN 534 Week 4 Chapter 6 Solution
• FIN 534 Week 4 Chapter 7 Solution
• FIN 534 Week 5 Chapter 8 Solution
• FIN 534 Week 5 Chapter 9 Solution
• FIN 534 Week 6 Chapter 10 Solution

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FIN 534 Week 1 Chapter 1 Solution

• 1. Which of the following statements is CORRECT?
• a. One of the disadvantages of a sole
  proprietorship is that the proprietor is exposed
  to unlimited liability.
• b. It is generally easier to transfer ones
  ownership interest in a partnership than in a
  corporation.
• c. One of the advantages of the corporate form of
  organization is that it avoids double taxation.
• d. One of the advantages of a corporation from a
  social standpoint is that every stockholder has
  equal voting rights, i.e., one person, one
  vote.
• e. Corporations of all types are subject to the
  corporate income tax.
• 2. Which of the following would be most likely to
  lead to higher interest rates on all debt
  securities in the economy?
• a. Households start saving a larger percentage of
  their income.

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FIN 534 Week 1 Chapter 2 Solution (Str Course)

• 1. Which of the following statements is CORRECT?
• a. Typically, a firms DPS should exceed its EPS.
• b. Typically, a firms EBIT should exceed its
  EBITDA.
• c. If a firm is more profitable than average
  (e.g., Google), we would normally expect to see
  its stock price exceed its book value per share.
• d. If a firm is more profitable than most other
  firms, we would normally expect to see its book
  value per share exceed its stock price,
  especially after several years of high inflation.
• e. The more depreciation a firm has in a given
  year, the higher its EPS, other things held
  constant.

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FIN 534 Week 1 DQ 1 (Str Course)

• Imagine a startup company of your own and briefly
  trace its development from a sole proprietorship
  to a major corporation with a focus on how that
  development would be financed.

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FIN 534 Week 1 DQ 2 (Str Course)

• Discuss ways that the basic concepts we have
  discussed in this chapter directly impact your
  life. Provide specific examples to support your
  response.

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Fin 534 Week 1 Quiz 1 (Str Course)

• Question 1
• You recently sold 100 shares of your new company,
  XYZ Corporation, to your brother at a family
  reunion. At the reunion your brother gave you a
  check for the stock and you gave your brother the
  stock certificates. Which of the following
  statements best describes this transaction?
• 1) This is an example of an exchange of physical
  assets.
• 2) This is an example of a primary market
  transaction.
• 3) This is an example of a direct transfer of
  capital.
• 4) This is an example of a money market
  transaction.
• 5) This is an example of a derivatives market
  transaction.

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FIN 534 Week 2 Chapter 3 Solution (Str Course)

• 1. Which of the following statements is CORRECT?
• a. The ratio of long-term debt to total capital
  is more likely to experience seasonal
  fluctuations than is either the DSO or the
  inventory turnover ratio.
• b. If two firms have the same ROA, the firm with
  the most debt can be expected to have the lower
  ROE.
• c. An increase in the DSO, other things held
  constant, could be expected to increase the total
  assets turnover ratio.
• d. An increase in the DSO, other things held
  constant, could be expected to increase the ROE.

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FIN 534 Week 3 Chapter 4 Solution (Str Course)

• 1. A 50,000 loan is to be amortized over 7
  years, with annual end-of-year payments. Which of
  these statements is CORRECT?
• a. The annual payments would be larger if the
  interest rate were lower.
• b. If the loan were amortized over 10 years
  rather than 7 years, and if the interest rate
  were the same in either case, the first payment
  would include more dollars of interest under the
  7-year amortization plan.
• c. The proportion of each payment that represents
  interest as opposed to repayment of principal
  would be lower if the interest rate were lower.
• d. The last payment would have a higher
  proportion of interest than the first payment.

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FIN 534 Week 3 Chapter 5 Solution (Str Course)

• 1 . Three 1,000 face value bonds that mature in
  10 years have the same level of risk, hence their
  YTMs are equal. Bond A has an 8 annual coupon,
  Bond B has a 10 annual coupon, and Bond C has a
  12 annual coupon. Bond B sells at par. Assuming
  interest rates remain constant for the next 10
  years, which of the following statements is
  CORRECT?
• a. Bond As current yield will increase each
  year.
• b. Since the bonds have the same YTM, they should
  all have the same price, and since interest rates
  are not expected to change, their prices should
  all remain at their current levels until maturity.

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FIN 534 Week 3 Quiz 2 (Str Course)

• Question 1
• Which of the following statements is CORRECT?
• a. Since companies can deduct dividends paid but
  not interest paid, our tax system favors the use
  of equity financing over debt financing, and this
  causes companies debt ratios to be lower than
  they would be if interest and dividends were both
  deductible.
• b. Interest paid to an individual is counted as
  income for tax purposes and taxed at the
  individuals regular tax rate, which in 2008
  could go up to 35, but dividends received were
  taxed at a maximum rate of 15.
• financial position at a point in time.

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FIN 534 Week 4 Chapter 6 Solution (Str Course)

• 1. Which of the following statements is CORRECT?
• a. If you add enough randomly selected stocks to
  a portfolio, you can completely eliminate all of
  the market risk from the portfolio.
• b. If you were restricted to investing in
  publicly traded common stocks, yet you wanted to
  minimize the riskiness of your portfolio as
  measured by its beta, then according to the CAPM
  theory you should invest an equal amount of money
  in each stock in the market. That is, if there
  were 10,000 traded stocks in the world, the least
  risky possible portfolio would include some
  shares of each one.

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FIN 534 Week 4 Chapter 7 Solution (Str Course)

• . Which of the following statements is CORRECT?
• a. The constant growth model takes into
  consideration the capital gains investors expect
  to earn on a stock.
• b. Two firms with the same expected dividend and
  growth rates must also have the same stock price.
• c. It is appropriate to use the constant growth
  model to estimate a stock's value even if its
  growth rate is never expected to become constant.

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FIN 534 Week 4 Quiz 3 (Str Course)

• 1. Which of the following statements is CORRECT?
• 1) A time line is not meaningful unless all cash
  flows occur annually
• 2) Time lines are useful for visualizing complex
  problems prior to doing actual calculations
• 3) Time lines cannot be constructed to deal with
  situations where some of the cash flows occur
  annually but others occur quarterly
• 4) Time lines can only be constructed for
  annuities where the payments occur at the ends of
  the periods, i.e., for ordinary annuities
• 5) Time lines cannot be constructed where some of
  the payments constitute an annuity but others are
  unequal and thus are not part of the annuity

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FIN 534 Week 5 Chapter 8 Solution (Str Course)

• 1. Which of the following statements is CORRECT?
• a. Put options give investors the right to buy a
  stock at a certain strike price before a
  specified date.
• b. Call options give investors the right to sell
  a stock at a certain strike price before a
  specified date.
• c. Options typically sell for less than their
  exercise value.
• d. LEAPS are very short-term options that were
  created relatively recently and now trade in the
  market.
• e. An option holder is not entitled to receive
  dividends unless he or she exercises their option
  before the stock goes ex dividend.
• 2. Which of the following statements is CORRECT?

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FIN 534 Week 5 Chapter 9 Solution (Str Course)

• 1. Bankston Corporation forecasts that if all of
  its existing financial policies are followed, its
  proposed capital budget would be so large that it
  would have to issue new common stock. Since new
  stock has a higher cost than retained earnings,
  Bankston would like to avoid issuing new stock.
  Which of the following actions would REDUCE its
  need to issue new common stock?
• a. Increase the dividend payout ratio for the
  upcoming year.
• b. Increase the percentage of debt in the target
  capital structure.
• c. Increase the proposed capital budget.

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FIN 534 Week 5 Quiz 4 (Str Course)

• Finance 534 week 5 quiz 4
• Question 1
• Assume that in recent years both expected
  inflation and the market risk premium (rM
• - rRF) have declined. Assume also that all stocks
  have positive betas. Which of the following would
  be most likely to have occurred as a result of
  these changes?
• Answer
• Question 2

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FIN 534 Week 6 Chapter 10 Solution (Str Course)

• 1. Which of the following statements is CORRECT?
• a. The internal rate of return method (IRR) is
  generally regarded by academics as being the best
  single method for evaluating capital budgeting
  projects.
• b. The payback method is generally regarded by
  academics as being the best single method for
  evaluating capital budgeting projects.
• c. The discounted payback method is generally
  regarded by academics as being the best single
  method for evaluating capital budgeting projects.

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FIN 534 Week 6 Chapter 11 Solution (Str Course)

• 1. Which of the following statements is CORRECT?
• a. An externality is a situation where a project
  would have an adverse effect on some other part
  of the firms overall operations. If the project
  would have a favorable effect on other
  operations, then this is not an externality.
• b. An example of an externality is a situation
  where a bank opens a new office, and that new
  office causes deposits in the banks other
  offices to decline.
• c. 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.

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FIN 534 Week 6 Quiz 5 (Str Course)

• Finance 534 week 6 Quiz5
• Question 1
• Call options on XYZ Corporations common stock
  trade in the market. Which of the following
  statements is most correct, holding other things
  constant?
• Question 2
• Other things held constant, the value of an
  option depends on the stock's price, the
  risk-free rate, and the
• Question 3
• Which of the following statements is CORRECT?
• Question 4
• Which of the following statements is CORRECT?

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FIN 534 Week 7 Chapter 12 Solution (Str Course)

• 1. Which of the following statements is CORRECT?
• a. Perhaps the most important step when
  developing forecasted financial statements is to
  determine the breakdown of common equity between
  common stock and retained earnings.
• b. The first, and perhaps the most critical, step
  in forecasting financial requirements is to
  forecast future sales.
• c. Forecasted financial statements, as discussed
  in the text, are used primarily as a part of the
  managerial compensation program, where
  managements historical performance is evaluated.

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FIN 534 Week 7 Chapter 13 Solution (Str Course)

• 1. Suppose Leonard, Nixon, Shull Corporations
  projected free cash flow for next year is
  100,000, and FCF is expected to grow at a
  constant rate of 6. If the companys weighted
  average cost of capital is 11, what is the value
  of its operations?
• a. 1,714,750
• b. 1,805,000
• c. 1,900,000
• d. 2,000,000
• e. 2,100,000
• 2. Leak Inc. forecasts the free cash flows (in
  millions) shown below. If the weighted average
  cost of capital is 11 and FCF is expected to
  grow at a rate of 5 after Year 2, what is the
  Year 0 value of operations, in millions? Assume
  that the ROIC is expected to remain constant in
  Year 2 and beyond (and do not make any half-year
  adjustments).
• Year 1 2

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FIN 534 Week 7 Quiz 6 (Str Course)

• Finance 534 week 7 quiz 6
• Question 1
• Which of the following statements is CORRECT?
• Answer
• Question 2
• Which of the following statements is CORRECT?
• Question 3
• Assume that the economy is in a mild recession,
  and as a result interest rates and money costs
  generally are relatively low. The WACC for two
  mutually exclusive projects that are being
  considered is 8. Project S has an IRR of 20
  while Project L's IRR is 15. The projects have
  the same NPV at the 8 current WACC.

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FIN 534 Week 8 Chapter 14 Solution (Str Course)

• 1. Which of the following statements about
  dividend policies is CORRECT?
• a. Modigliani and Miller argue that investors
  prefer dividends to capital gains because
  dividends are more certain than capital gains.
  They call this the ?bird-in-the hand? effect.
• b. One reason that companies tend to avoid stock
  repurchases is that dividend payments are taxed
  at a lower rate than gains on stock repurchases.
• c. One advantage of dividend reinvestment plans
  is that they allow shareholders to avoid paying
  taxes on the dividends that they choose to
  reinvest.

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FIN 534 Week 8 Chapter 15 Solution (Str Course)

• 1. Which of the following statements best
  describes the optimal capital structure?
• a. The optimal capital structure is the mix of
  debt, equity, and preferred stock that maximizes
  the companys earnings per share (EPS).
• b. The optimal capital structure is the mix of
  debt, equity, and preferred stock that maximizes
  the companys stock price.
• c. The optimal capital structure is the mix of
  debt, equity, and preferred stock that minimizes
  the companys cost of equity.
• d. The optimal capital structure is the mix of
  debt, equity, and preferred stock that minimizes
  the companys cost of debt.
• e. The optimal capital structure is the mix of
  debt, equity, and preferred stock that minimizes
  the companys cost of preferred stock.

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FIN 534 Week 8 Quiz 7 (Str Course)

• Finance 534 week 8 quiz 7
• This quiz consist of 30 multiple choice
  questions. The first 15 questions cover the
  material in Chapter 12. The second 15 questions
  cover the material in Chapter 13. Be sure you are
  in the correct Chapter when you take the quiz.
• Question 1
• Last year Godinho Corp. had 250 million of
  sales, and it had 75 million of fixed assets
  that were being operated at 80 of capacity. In
  millions, how large could sales have been if the
  company had operated at full capacity?
• Question 2
• Which of the following is NOT a key element in
  strategic planning as it is described in the
  text?
• Question 3
• Spontaneous funds are generally defined as
  follows

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FIN 534 Week 9 Chapter 16 Solution (Str Course)

• 1. Swim Suits Unlimited is in a highly seasonal
  business, and the following summary balance sheet
  data show its assets and liabilities at peak and
  off-peak seasons (in thousands of dollars)
• Peak Off-Peak
• Cash 50 30
• Marketable securities 0 20
• Accounts receivable 40 20
• Inventories 100 50
• Net fixed assets 500 500
• Total assets 690 620

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FIN 534 Week 9 Quiz 8 (Str Course)

• Question 1
• Which of the following statements about dividend
  policies is correct?
• Question 2
• If a firm adheres strictly to the residual
  dividend policy, the issuance of new common stock
  would suggest that
• Question 3
• Which of the following statements is correct?
• Answer
• Correct Answer
• If a firm repurchases some of its stock in the
  open market, then shareholders who sell their
  stock for more than they paid for it will be
  subject to capital gains taxes.

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FIN 534 Week 10 Chapter 17 Solution (Str Course)

• 1. In Japan, 90-day securities have a 4
  annualized return and 180-day securities have a
  5 annualized return. In the United States,
  90-day securities have a 4 annualized return and
  180-day securities have an annualized return of
  4.5. All securities are of equal risk, and
  Japanese securities are denominated in terms of
  the Japanese yen. Assuming that interest rate
  parity holds in all markets, which of the
  following statements is most CORRECT?
• a. The yen-dollar spot exchange rate equals the
  yen-dollar exchange rate in the 90-day forward
  market.

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FIN 534 Week 11 Quiz 10 (Str Course)

• Finance 534 week 11 quiz 10
• Question 1
• Suppose DeGraw Corporation, a U.S. exporter, sold
  a solar heating station to a Japanese customer at
  a price of 143.5 million yen, when the exchange
  rate was 140 yen per dollar. In order to close
  the sale, DeGraw agreed to make the bill payable
  in yen, thus agreeing to take some exchange rate
  risk for the transaction. The terms were net 6
  months. If the yen fell against the dollar such
  that one dollar would buy 154.4 yen when the
  invoice was paid, what dollar amount would DeGraw
  actually receive after it exchanged yen for U.S.
  dollars?

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FIN 534 GENIUS Expect Success /fin534geniusdotcom

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