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ABA CTFA Practice Test - Questions Answers, Page 12

List of questions

Question 111

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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 firm's weighted-average cost of capital
The project's required rate of return
The project's required rate of return
The risk-free rate
The risk-free rate
The after-tax cost of the firm's long-term debt
The after-tax cost of the firm's long-term debt
Suggested answer: C
asked 16/09/2024
Vivek Nandey
38 questions

Question 112

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A managerial option, in effect:

Limits the flexibility of management's decision-making
Limits the flexibility of management's decision-making
Limits the downside risk of an investment project
Limits the downside risk of an investment project
Limits the profit potential of a proposed project
Limits the profit potential of a proposed project
Applies only to new projects
Applies only to new projects
Suggested answer: B
asked 16/09/2024
Kaliannan K
40 questions

Question 113

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The presence of managerial, or real, options the worth of an investment project.

Increases
Increases
Decreases
Decreases
Does not affect
Does not affect
Increases or decrease
Increases or decrease
Suggested answer: A
asked 16/09/2024
Susanne Hughes
37 questions

Question 114

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

Sales variability
Sales variability
Level of fixed operating costs
Level of fixed operating costs
Closeness to its operating break-even point
Closeness to its operating break-even point
Debt-to-equity ratio
Debt-to-equity ratio
Suggested answer: C
asked 16/09/2024
Emanuel Sifuentes
47 questions

Question 115

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EBIT is usually the same thing as:

Funds provided by operations
Funds provided by operations
Earnings before taxes
Earnings before taxes
Net income
Net income
Operating income
Operating income
Suggested answer: D
asked 16/09/2024
muhammad ikram
36 questions

Question 116

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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:

Fall
Fall
Rise
Rise
Stay the same
Stay the same
Still be indeterminate until interest and preferred dividends paid are known
Still be indeterminate until interest and preferred dividends paid are known
Suggested answer: A
asked 16/09/2024
Tom Nice
33 questions

Question 117

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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 earnings per share (CVEPS)
Coefficient of variation of operating income (CVEBIT)
Coefficient of variation of operating income (CVEBIT)
(CVEPS - CVEBIT)
(CVEPS - CVEBIT)
(CVEPS + CVEBIT)
(CVEPS + CVEBIT)
Suggested answer: C
asked 16/09/2024
Yannik Huith blu Systems GmbH
35 questions

Question 118

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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 .

less than 0.75
less than 0.75
more than 0.75, but less than 1.10
more than 0.75, but less than 1.10
equal to 1.10
equal to 1.10
equal to 0.95 {i.e., (1/3) x (0.75 + 1.00 + 1.10)}
equal to 0.95 {i.e., (1/3) x (0.75 + 1.00 + 1.10)}
Suggested answer: B
asked 16/09/2024
Saphronia Yancey
44 questions

Question 119

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What's the value to you of a $1,000 face-value bond with an 8% coupon rate when your required rate of return is 15 percent?

More than its face value
More than its face value
Less than its face value
Less than its face value
$1000
$1000
True
True
Suggested answer: B
asked 16/09/2024
Reselan Govender
40 questions

Question 120

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

The stock has a low level of risk
The stock has a low level of risk
The stock offers a high dividend payout ratio
The stock offers a high dividend payout ratio
The market is undervaluing the stock
The market is undervaluing the stock
The market is overvaluing the stock
The market is overvaluing the stock
Suggested answer: C
asked 16/09/2024
Jennifer Lear
49 questions
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