Please select ALL the correct answers for a thumbs up. Thanks :) 1. MMs’ Proposition II states...

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Finance

Please select ALL the correct answersfor a thumbs up. Thanks :)
1. MMs’ Proposition II states that thevalue of the firm depends on all of the following except,
Required rate of return on the firm’s assets
Cost of debt of the firm
Debt to equity ratio of the firm
Cost of equity of the firm
2. which of the following types of risk is most difficult tomanage?
a. interest rate risk
b. exchange rate risk
c. price risk
d. demand risk
3. which of the following statements regarding futures andforward contracts is most correct?
a. futures contracts are similar to forward contracts except forthe length of time the contract is outstanding?
b. forward contracts are “,marked to market” on a daily basis,while futures contracts are not “marked to market”
c. with forward contracts, physical delivery of the underlyingasset is virtually ne never take
d. all of the statements are false
4. you are given the following: stock price= 100; strike price=120; call price= $4.50; put=$0.95; t=90 days. What would be theintrinsic value of the call option?
a. 0.00
b. 10.00
c. 20.00
d. -4.50
5. a tender offer is
a. the last step in the consolidation of two firms
b. the initial offer made by the acquiring form to thedissenting shareholders of the acquired firm in a mergerproceeding
c. a fair offer by an acquiring firm;s shareholders inaccordance with their appraisal rights.
d. a public offer to purchase shares of a target firm.
6. diversification is considered a dubious reason formerger because:
a. personal diversification is possibly by the firm itself
b. risk reduction is achieved by more bondholders thanstockholders.
c. diversification only minimizes unsystematic risk
d. all of the above
7. According to the trade-off theory
a. the firm should increase debt until it covers the pv cost offinancial distress
b. the firm should increase debt until the value from the pv taxshield is just offset, at the margin but increase in PV cost offinancial distress
c. the firm should increase debt until the increase in pv costof financial distress is offset by the tax shield.
d. the firm should increase debt until the value from pv taxshield is just offset at the margin
8.
under the pecking order theory, what is the order in which firmswill obtain financing?
a. internal financing, debt, equity
b. equity, debt, internal financing
c. debt, internal financing, equity
d. equity, internal financing, debt
9. the date on which the right to the current dividend no longeraccompanies a stock is called
a. declaration date
b. payment date
c. ex-dividend rate
d. holder of record date
10. which of the following represent differences between aforward contract and a futures contract?
i. a futures contract only specifies the month of deliverywhereas a forward contract specifies the date of delivery
ii. a forward contract is traded on an exchange while a futurecontract is not
iii. with a futures contract, but not with a forward contract,the party which takes delivery may not be the original party whichentered the contract with the seller.
Iv. Forward contracts are marked to the market daily whereasfutures contracts are not.
iii only
I and iii only
Ii and iv only
Iii and iv only

Answer & Explanation Solved by verified expert

4.1 Ratings (754 Votes)

Ans 1 Correct answer will be option i required rate of return on the firms asset formaula is re ro rd ro1tde as we can see in this formula there is all other factors like cost of debtrd debt to equity ratiode and return in equityre Ans 2 Exchange rate risk is most difficult to manage because See Answer

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Please select ALL the correct answersfor a thumbs up. Thanks :)1. MMs’ Proposition II states that thevalue of the firm depends on all of the following except,Required rate of return on the firm’s assetsCost of debt of the firmDebt to equity ratio of the firmCost of equity of the firm2. which of the following types of risk is most difficult tomanage?a. interest rate riskb. exchange rate riskc. price riskd. demand risk3. which of the following statements regarding futures andforward contracts is most correct?a. futures contracts are similar to forward contracts except forthe length of time the contract is outstanding?b. forward contracts are “,marked to market” on a daily basis,while futures contracts are not “marked to market”c. with forward contracts, physical delivery of the underlyingasset is virtually ne never taked. all of the statements are false4. you are given the following: stock price= 100; strike price=120; call price= $4.50; put=$0.95; t=90 days. What would be theintrinsic value of the call option?a. 0.00b. 10.00c. 20.00d. -4.505. a tender offer isa. the last step in the consolidation of two firmsb. the initial offer made by the acquiring form to thedissenting shareholders of the acquired firm in a mergerproceedingc. a fair offer by an acquiring firm;s shareholders inaccordance with their appraisal rights.d. a public offer to purchase shares of a target firm.6. diversification is considered a dubious reason formerger because:a. personal diversification is possibly by the firm itselfb. risk reduction is achieved by more bondholders thanstockholders.c. diversification only minimizes unsystematic riskd. all of the above7. According to the trade-off theorya. the firm should increase debt until it covers the pv cost offinancial distressb. the firm should increase debt until the value from the pv taxshield is just offset, at the margin but increase in PV cost offinancial distressc. the firm should increase debt until the increase in pv costof financial distress is offset by the tax shield.d. the firm should increase debt until the value from pv taxshield is just offset at the margin8.under the pecking order theory, what is the order in which firmswill obtain financing?a. internal financing, debt, equityb. equity, debt, internal financingc. debt, internal financing, equityd. equity, internal financing, debt9. the date on which the right to the current dividend no longeraccompanies a stock is calleda. declaration dateb. payment datec. ex-dividend rated. holder of record date10. which of the following represent differences between aforward contract and a futures contract?i. a futures contract only specifies the month of deliverywhereas a forward contract specifies the date of deliveryii. a forward contract is traded on an exchange while a futurecontract is notiii. with a futures contract, but not with a forward contract,the party which takes delivery may not be the original party whichentered the contract with the seller.Iv. Forward contracts are marked to the market daily whereasfutures contracts are not.iii onlyI and iii onlyIi and iv onlyIii and iv only