FIN 340: Valuation of the Firm CRN 70877 Fall 2017 Final Exam Student Name: Mult

Question

FIN 340: Valuation of the Firm CRN 70877 Fall 2017 Final Exam Student Name: Multiple Choice and Fill in Answer- 2 Points Each- 60 total points 1. Which one of the following actions would help a company create lone.term sustainable value? a) Focus on keeping costs at a minimum. b) Find the optimal debt-to-equity ratio. c) Seek and exploit new sources of competitive advantage d) Monitor and follow macroeconomic trends. Answer 2. Under which condition will a fast-growing firm create value? a) It will create value in any circumstance. b) If the return on invested capital (ROIC) is greater than the cost of capital. c) If the return on invested capital (ROIC) is less than the cost of capital. d) If the firm increases market share. Answer 3. If the investment rate of a company is 10 percent and the ROIC is 20 percent, what is the gro a) 5 percent. b) 50 percent. c) 2 percent. d) 200 percent. Answer -

Explanation / Answer

Ans 1: A (Keeping cost to minimum will help in getting competitive edge which help in long term sustainable of the business.)

Ans2: D (If market share is increasing company is creating value)

Ans3:C (Investment rate of company is10% and ROIC is 20% which means 20% of 10% is 0.02.Which is nothing by 2% of overall investment.)

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