The investment proposal with the greatest relative risk would have:

The highest coefficient of variation of net present value

The highest standard deviation of net present value

The highest coefficient of variation of net present value

The highest expected value of net present value

The lowest opportunity loss likelihood

Probability-tree analysis is best used when cash flows are expected to be:

Related to the cash flows in previous periods

You are considering two mutually exclusive investment proposals, project A and project B B's expected value of net present value is $1,000 less than that for A and A has less dispersion. On the basis of risk and return, you would say that

Project A is more risky and should offer greater expected value

Each project is high on one variable, so the two are basically equal

Managerial options can be viewed as:

Opportunities for altering management decisions in the future

Methods for reducing agency risk through the use of incentives

Methods for reducing total firm risk through diversification

Strategies for increasing management compensation

Opportunities for altering management decisions in the future

Is a booklet provided with a supply of check

Used to maintain accurate record

The amount of liquid funds will vary with your personal circumstances and comfort level. Another useful liquidity guideline is to have a reserve fund equal to:

3 to 6 months of after tax income

4 to 8 months of after tax income

Even if, the annual balances, in certain months expenses may exceed income, causing a monthly budget deficit. Likewise, a surplus occurs when income in some months exceed expenses. It remedy may be:

Shift expenses from months which budget, deficits to months with surpluses for, (or alternatively, transfer income, if possible, from months with surpluses to those with deficit)

Use savings, investments, or borrowing to cover temporary deficits

Shift expenses from months which budget, deficits to months with surpluses for, (or alternatively, transfer income, if possible, from months with surpluses to those with deficit)

Use savings, investments, or borrowing to cover temporary deficits

The amount of income subject to taxes; it is calculated by subtracting adjustments, the larger of itemized or standard deductions, and exemptions from gross income

The amount of income subject to taxes; it is calculated by subtracting expenses, the larger of itemized or standard deductions, and exemptions from gross income

The amount of income subject to taxes; it is calculated by subtracting adjustments, the larger of itemized or standard depreciations, and exemptions from gross income

The amount of income subject to taxes; it is calculated by subtracting adjustments, the larger of itemized or standard deductions, and exemptions from gross income

The amount of income subject to taxes; it is calculated by subtracting adjustments, the larger of itemized or standard deductions, and exemptions from earned income

Gross income essentially includes any and all income subject to federal taxes. Here are some common forms of gross income Except:

Interest and dividends received

An adoption tax credit of up to $11650 is available for the qualifying costs of adopting child under age 18. Only taxpayers with AGI under $17,730 are eligible for the adoption tax credit. Here are some other common tax credits. Which of the following is/are Not out of those?

Credit for the elderly or the disabled

Credit for prior year minimum tax

Credit for qualified electric vehicle

When using a probability tree approach, we discount the various cash flows to their present value at:

The firm's weighted-average cost of capital

The project's required rate of return

The after-tax cost of the firm's long-term debt

A managerial option, in effect:

Limits the downside risk of an investment project

Limits the flexibility of management's decision-making

Limits the downside risk of an investment project

Limits the profit potential of a proposed project

A firm's degree of operating leverage (DOL) depends primarily upon its:

Closeness to its operating break-even point

In the context of operating leverage break-even analysis, if selling price per unit rises and all other variables remain constant, the operating break-even point in units will:

Still be indeterminate until interest and preferred dividends paid are known

This statistic can be used as a quantitative measure of relative 'financial risk.'

Coefficient of variation of earnings per share (CVEPS)

Coefficient of variation of operating income (CVEBIT)

Espinosa Coffee & Trading, Inc.'s common stock measured beta is calculated to be 0.75. The market beta is, of course, 1.00 and the beta of the industry of which the company is a part is 1.10. If Merrill Lych were to calculate an 'adjusted beta' for Espinosa's common stock, that adjusted beta would most likely be .

more than 0.75, but less than 1.10

equal to 0.95 {i.e., (1/3) x (0.75 + 1.00 + 1.10)}

If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion?

The market is undervaluing the stock

The stock has a low level of risk

The stock offers a high dividend payout ratio

The market is undervaluing the stock

The market is overvaluing the stock

ABA CTFA Practice Test 3 - Free Online Exam Prep & Questions

Which of the following would be included in a cash budget?

Depreciation charges

Dividends

Patents

Amortization

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