罗斯公司理财题库全集

Chapter18-ValuationandCapitalBudgetingfortheLeveredFirm18-1Chapter18ValuationandCapitalBudgetingfortheLeveredFirmMultipleChoiceQuestions1.Theflow-to-equity(FTE)approachincapitalbudgetingisdefinedtobethe:A.discountingallcashflowsfromaprojectattheoverallcostofcapital.B.scaleenhancingdiscountprocess.C.discountingoftheleveredcashflowstotheequityholdersforaprojectattherequiredreturnonequity.D.dividendsandcapitalgainsthatmayflowtoashareholdersofanyfirm.E.discountingoftheunleveredcashflowsofaprojectfromaleveredfirmattheWACC.2.TheacronymAPVstandsfor:A.appliedpresentvalue.B.allpurposevariable.C.acceptedprojectverified.D.adjustedpresentvalue.E.appliedprojectedvalue.3.Aleveragedbuyout(LBO)iswhenafirmisacquiredby:A.asmallgroupofmanagementwithequityfinancing.B.asmallgroupofequityinvestorsfinancingthemajorityofthepricebydebt.C.anygroupofequityinvestorswhenthemajorityisfinancedwithpreferredstock.D.anygroupofinvestorsfortheassetsofthecorporation.E.Noneoftheabove.4.Discountingtheunleveredaftertaxcashflowsbythe_____minusthe______yieldsthe________.A.costofcapitalfortheunleveredfirm;initialinvestment;adjustedpresentvalue.B.costofequitycapital;initialinvestment;projectNPV.C.weightedcostofcapital;fractionalequityinvestment;projectNPV.D.costofcapitalfortheunleveredfirm;initialinvestment;all-equitynetpresentvalue.E.Noneoftheabove.Chapter18-ValuationandCapitalBudgetingfortheLeveredFirm18-25.Theacceptanceofacapitalbudgetingprojectisusuallyevaluatedonitsownmerits.Thatis,capitalbudgetingdecisionsaretreatedseparatelyfromcapitalstructuredecisions.Inreality,thesedecisionsmaybehighlyinterwoven.Thismayresultin:A.firmsrejectingpositiveNPV,allequityprojectsbecausechangingtoacapitalstructurewithdebtwillalwayscreatenegativeNPV.B.neverconsideringcapitalbudgetingprojectsontheirownmerits.C.corporatefinancialmanagersfirstcheckingwiththeirinvestmentbankerstodeterminethebesttypeofcapitaltoraisebeforevaluingtheproject.D.firmsacceptingsomenegativeNPVallequityprojectsbecausechangingthecapitalstructureaddsenoughpositiveleveragetaxshieldvaluetocreateapositiveNPV.E.firmsneverchangingthecapitalstructurebecauseallcapitalbudgetingdecisionswillbesubsumedbycapitalstructuredecisions.6.TheAPVmethodiscomprisedoftheallequityNPVofaprojectandtheNPVoffinancingeffects.Thefoursideeffectsare:A.taxsubsidyofdividends,costofissuingnewsecurities,subsidyoffinancialdistressandcostofdebtfinancing.B.costofissuingnewsecurities,costoffinancialdistress,taxsubsidyofdebtandothersubsidiestodebtfinancing.C.costofissuingnewsecurities,costoffinancialdistress,taxsubsidyofdividendsandcostofdebtfinancing.D.subsidyoffinancialdistress,taxsubsidyofdebt,costofotherdebtfinancingandcostofissuingnewsecurities.E.Noneoftheabove.7.IncalculatingtheNPVusingtheflow-to-equityapproachthediscountrateisthe:A.allequitycostofcapital.B.costofequityfortheleveredfirm.C.allequitycostofcapitalminustheweightedaveragecostofdebt.D.weightedaveragecostofcapital.E.allequitycostofcapitalplustheweightedaveragecostofdebt.Chapter18-ValuationandCapitalBudgetingfortheLeveredFirm18-38.Theappropriatecostofdebttothefirmis:A.theweightedcostofdebtaftertax.B.theleveredequityrate.C.themarketborrowingrateaftertax.D.thecouponratepre-tax.E.Noneoftheabove.9.Althoughthethreecapitalbudgetingmethodsareequivalent,theyallcanhavedifficultiesmakingcomputationimpossibleattimes.Themostusefulmethodsortoolsfromapracticalstandpointare:A.APVbecausedebtlevelsareunknowninfutureyears.B.WACCbecauseprojectshaveconstantriskandtargetdebttovalueratios.C.Flow-to-equitybecauseofconstantriskandthatmanagersthinkintermsofoptimaldebttoequityratios.D.BothAandB.E.BothBandC.10.TheAPVmethodtovalueaprojectshouldbeusedwhenthe:A.project'slevelofdebtisknownoverthelifeoftheproject.B.project'stargetdebttovalueratioisconstantoverthelifeoftheproject.C.project'sdebtfinancingisunknownoverthelifeoftheproject.D.BothAandB.E.BothBandC.11.Inordertovalueaprojectwhichisnotscaleenhancingyouneedto:A.typicallycalculatetheequitycostofcapitalusingtheriskadjustedbetaofanotherfirmintheindustrybeforecalculatingtheWACC.B.typicallyincreasethebetaofanotherfirminthesamelineofbusinessandthencalculatethediscountrateusingtheSML.C.typicallyyoucansimplyapplyyourcurrentcostofcapital.D.discountatthemarketrateofreturnsincetheprojectwilldiversifythefirmtothemarket.E.typicallycalculatetheequitycostofcapitalusingtheriskadjustedbetaofanotherfirminanotherindustrybeforecalculatingtheWACC.Chapter18-ValuationandCapitalBudgetingfortheLeveredFirm18-412.Whichcapitalbudgetingtools,ifproperlyused,willyieldthesameanswer?A.WACC,IRR,andAPVB.NPV,IRR,andAPVC.NPV,APVandFlowtoDebtD.NPV,APVandWACCE.APV,WACC,andFlowtoEquity13.Theflow-to-equityapproachtocapitalbudgetingisathreestepprocessof:A.calculatingtheleveredcashflow,thecostofequitycapitalforaleveredfirm,thenaddingtheinterestexpensewhenthecashflowsarediscounted.B.calculatingtheunleveredcashflow,thecostofequitycapitalforaleveredfirm,andthendiscountingtheunleveredcashflows.C.calculatingtheleveredcashflowafterinterestexpenseandtaxes,thecostofequitycapitalforaleveredfirm,an