FIN540 Final Exam Complete SolutionGUARANTEE

Question: #1104

1. Question : Costco has been successful in part due to its unique approach to staffing. Which of the following statements correctly explains its approach in this area?
Student Answer: Costco promotes employees with in-store experience and sponsors them to take graduate-level business courses.
Costco hires only managers who have worked for its competitors.

Costco holds employees’ jobs while they pursue business school degrees on their own.
Costco hires business school graduates directly out of college.

Question 2. Question : ________ is/are an example of a recession-sensitive industry, while ________ is/are an example of a recession-proof industry.
Student Answer: toiletries; construction

auto parts; air travel

air travel; toiletries

toiletries; auto parts

Question 3. Question : Which of the following expressions most closely captures the essence of a strategic business unit?
Student Answer: “the lifeblood of a company”

“a company within a company”

“the heart of a company”

“the future of a company”

Question 4. Question : Howard is the CEO of Run! Jump! Sing!, a chain of indoor play gyms for toddlers and preschoolers. After repeatedly hearing from gym staff that several children have been hurt in the bounce house play area, Howard decides to remove all bounce houses from Run! Jump! Sing! establishments. What kind of assessment is this most likely described as?
Student Answer: strategic assessment

tactical/functional assessment

operational assessment

external environmental assessment

Question 5. Question : Diehard Sneakers’ quality control team analyzes how often their product is returned because of defects. What kind of assessment is this?
Student Answer: strategic assessment

tactical/functional assessment

operational assessment

external environmental assessment

Question 6. Question : Which of the following is NOT considered an influential social trend?
Student Answer: educational disparity

recession

gender expectations

family size

Question 7. Question : Before establishing her own dentist office, Dr. Thorton evaluates other dentist services in the area. What element of a SWOT analysis would other dentist services most closely represent?
Student Answer: strength

opportunity

threat

weakness

Question 8. Question : All of the following are considered noncontrollable forces EXCEPT
Student Answer: social trends

technological changes

local communities

political forces

Question 9. Question : Which of the following lists correctly identifies the five management functions?
Student Answer: organizing, staffing, leading, controlling, and financing

planning, organizing, staffing, leading, and controlling

planning, organizing, staffing, leading, and financing

planning, staffing, leading, controlling, and budgeting

Question 10. Question : Which of the following is NOT a characteristic of organization?
Student Answer: All organizations need at least one member.

All organizations have a hierarchy of authority.

All organizations divide tasks among their members.

All the members of an organization share a common purpose or goal.

Solution: #1109

FIN540 Final Exam Complete Solution Complete Solution GUARANTEE

Question 1
1. Which is the best measure of risk for an asset held in isolation, and which is the best measure for an asset held in a diversified portfolio?
Answer
Variance; correlation coefficient.
Standard deviation; correlation coefficient.
Beta; variance.
Coefficient of variation; beta.
Beta; beta.
8 points
Question 2
1. Which of the following statements about pension plans if any, is incorrect?
Answer
A defined contribution plan is, in effect, a savings plan that is funded by employers, although many plans also permit additional contributions by employees.
Under a defined benefit plan, the employer agrees to give retirees a specifically defined benefit, such as $500 per month or 50 percent of the employee’s final salary.
A portable pension plan is one that an employee can carry from one employer to another.
An employer’s obligation is satisfied under a defined contribution plan when it makes the required contributions to the plan. The risk of inadequate investment returns is borne by the employee.
If assets exceed the present value of benefits, the pension plan is fully funded.
8 points
Question 3
1. You have the following data on three stocks:
Stock Standard Deviation Beta
A 0.15 0.79
B 0.25 0.61
C 0.20 1.29
As a risk minimizer, you would choose Stock if it is to be held in isolation and Stock if it is to be held as part of a well-diversified portfolio.
Answer
A; A.
A; B.
B; C.
C; A.
C; B.
8 points
Question 4
1. Which of the following statements concerning capital structure theory is NOT
CORRECT?
Answer
The major contribution of Miller's theory is that it demonstrates that personal taxes decrease the value of using corporate debt.
Under MM with zero taxes, financial leverage has no effect on a firm’s value.
Under MM with corporate taxes, the value of a levered firm exceeds the value of the unlevered firm by the product of the tax rate times the market value dollar amount of debt.
Under MM with corporate taxes, rs increases with leverage, and this increase exactly offsets the tax benefits of debt financing.
Under MM with corporate taxes, the effect of business risk is automatically incorporated because rsL is a function of rsU.
8 points
Question 5
1. Which of the following would cause average inventory holdings to decrease, other things held constant?
Answer
Fixed order costs double.
The purchase price of inventory items decreases by 50 percent.
The carrying price of an item decreases (as a percent of purchase price).
The sales forecast is revised downward by 10 percent.
Interest rates fall.
8 points
Question 6
1. Which of the following is NOT a real option?
Answer
The option to expand production if the product is successful.
The option to buy shares of stock if its price goes up.
The option to expand into a new geographic region.
The option to abandon a project.
The option to switch the type of fuel used in an industrial furnace.
8 points
Question 7
1. Which of the following statements is CORRECT?
Answer
The typical R2 for a stock is about 0.3 and the typical R2
for a portfolio is also about 0.3.
The typical R2 for a stock is about 0.94 and the typical R2
for a portfolio is about 0.6.
The typical R2 for a stock is about 0.3 and the typical R2 for a large portfolio is about 0.94.
The typical R2 for a stock is about 0.94 and the typical R2 for a portfolio is also about 0.94.
The typical R2 for a stock is about 0.6 and the typical R2 for a portfolio is also about 0.6.
8 points
Question 8
1. Which of the following will NOT increase the value of a real option?
Answer

Lengthening the time in which a real option must be exercised.
An increase in the volatility of the underlying source of risk.
An increase in the risk-free rate.
An increase in the cost of obtaining the real option.
A decrease in the probability that a competitor will enter the market of the project in question.
8 points
Question 9
1. Which of the following statements is most CORRECT?
Answer
One advantage of forward contracts is that they are default free.
Futures contracts generally trade on an organized exchange and are marked to market daily.
Goods are never delivered under forward contracts, but are almost always delivered under futures contracts.
There are futures contracts for currencies but no forward contracts for currencies.
Futures contracts don’t have any margin requirements but forward contracts do.
8 points
Question 10
1. Which of the following statements concerning the MM extension with growth is NOT
CORRECT?
Answer
The tax shields should be discounted at the cost of debt.
The value of a growing tax shield is greater...