The dividend growth model to calculate the cost of equity

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Reference no: EM132021968

1. _______ exposure is the potential for an increase or decrease in the parent company's net worth and reported net income caused by a change in exchange rates since the last translation.

a. Translation

b. Operating

c. Currency

d. Transaction

2. Assuming you use the dividend growth model to calculate the cost of equity, which of the following terms is NOT necessary when determining a firm's weighted average cost of capital (WACC)?

a. the risk-free rate of return

b. the firm's weight of debt financing

c. the firm's weight of equity financing

d. All of the other answers are necessary to determine a firm's WACC.

3. Which of the following is NOT true about forfaiting?

a. The exporter sells bank-guaranteed promissory notes at its face value.

b. Exporter receives an unconditional cash payment at the time of the transaction.

c. The political and commercial risk is carried by the guaranteeing bank.

d. The exporter is responsible for the quality of delivered goods.

4. Polaris Corporation has made an agreement to ship goods to a foreign firm with whom they have not entered into a contract for three years. However, the firms have communicated regularly since the last sale three years ago. This is an example of an:

a. unaffiliated unknown party transaction.

b. unaffiliated known party transaction.

c. affiliated party transaction.

d. none of the other answers

5. If a firm lies within a country with ________ or ________ domestic capital markets, it can achieve lower global cost and greater availability of capital with a properly designed and implemented strategy to participate in international capital markets.

a. large; illiquid

b. liquid; segmented

c. illiquid; segmented

d. liquid; large

Reference no: EM132021968

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