FINANCIAL MANAGEMENT (FIN 301)
FINAL EXAMINATION, SPRING 2014
MAY 17, 2014
INSTRUCTOR : DR. ADIL / DR. MOHAMMED
NAME:_____________________________________ STUDENT ID:____________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) ________ is the process of evaluating and selecting long-term investments consistent with the firm's goal of
owner wealth maximization.
A) Restructuring debt B) Ratio analysis
C) Recapitalizing assets D) Capital budgeting
2) Fixed assets that provide the basis for the firm's profit and value are often called
A) non-current assets. B) book assets.
C) tangible assets. D) earning assets.
3) The final step in the capital budgeting process is
A) re-evaluation. B) implementation. C) follow-up. D) education.
4) A $60,000 outlay for a new machine with a usable life of 15 years is called
A) operating expenditure. B) replacement expenditure.
C) capital expenditure. D) none of the above.
5) ________ projects do not compete with each other; the acceptance of one ________ the others from
A) Independent; does not eliminate B) Replacement; does not eliminate
C) Capital; eliminates D) Mutually exclusive; eliminates
6) A firm with limited dollars available for capital expenditures is subject to
A) capital dependency. B) capital rationing.
C) working capital constraints. D) mutually exclusive projects.
7) Which of the following capital budgeting techniques ignores the time value of money?
A) Internal rate of return. B) Net present value.
C) Payback. D) Two of the above.
8) ________ projects have the same function; the acceptance of one ________ the others from consideration.
A) Independent; does not eliminate B) Capital; eliminates
C) Replacement; does not eliminate D) Mutually exclusive; eliminates
9) The first step in the capital budgeting process is
A) review and analysis. B) implementation.
C) proposal generation. D) decision-making.
10) The ________ measures the amount of time it takes the firm to recover its initial investment.
A) net present value B) payback period
C) average rate of return D) internal rate of return
11) A firm is evaluating three capital projects. The net present values for the projects are as follows:
A) accept Project 1 and reject Projects 2 and 3. B) reject all projects.
C) accept Projects 1 and 3 and reject Project 2. D) accept Projects 1 and 2 and reject Project 3.
12) If a person's required return does not change when risk increases, that person is said to be
A) risk-neutral. B) risk-aware. C) risk-averse. D) risk-seeking.
13) The ________ of an asset is the change in value plus any cash distributions expressed as a percentage of the
initial price or amount invested.
A) probability B) value C) risk D) return
14) If a person requires greater return when risk increases, that person is said to be