Question_Doc9_15Dec_3rd Question_Doc9_15Dec_3rd Question 8-15. Suppose you purchase a 30-year Treasury bond with a 5% annual coupon, initially trading at par. In 10 years’ time, the bond’s yield to maturity has risen to 7% (EAR). a. If you sell the bond now, what internal rate of return will you have earned on your investment in the bond? b. If instead you hold the bond to maturity, what internal rate of return will you earn on your investment in the bond? c. Is comparing the IRRs in (a) versus (b) a useful way to evaluate the decision to sell the bond? Explain. 8-16. Suppose the current yield on a one-year, zero coupon bond is 3%, while the yield on a five-year, zero coupon bond is 5%. Neither bond has any risk of default. Suppose you plan to invest for one year. You will earn more over the year by investing in the five-year bond as long as its yield does not rise above what level? 8-17. What is the price today of a two-year, default-free security with a face value of $1000 and an annual coupon rate of 6%? Does this bond trade at a discount, at par, or at a premium? 8-18. What is the price of a five-year, zero-coupon, default-free security with a face value of $1000? 8-19. What is the price of a three-year, default-free security with a face value of $1000 and an annual coupon rate of 4%? What is the yield to maturity for this bond? 8-20. What is the maturity of a default-free security with annual coupon payments and a yield to maturity of 4%? Why? . 8-21. Consider a four-year, default-free security with annual coupon payments and a face value of $1000 that is issued at par. What is the coupon rate of this bond? 8-22. Consider a five-year, default-free bond with annual coupons of 5% and a face value of $1000. a. Without doing any calculations, determine whether this bond is trading at a premium or at a discount. Explain. b. What is the yield to maturity on this bond? c. If the yield to maturity on this bond increased to 5.2%, what would the new price be? 8-23. Prices of zero-coupon, default-free securities with face values of $1000 are summarized in the following table: Suppose you observe that a three-year, default-free security with an annual coupon rate of 10% and a face value of $1000 has a price today of $1183.50. Is there an arbitrage opportunity? If so, show specifically how you would take advantage of this opportunity. If not, why not? 8-24. Assume there are four default-free bonds with the following prices and future cash flows: Do these bonds present an arbitrage opportunity? If so, how would you take advantage of this opportunity? If not, why not? 8-25. Suppose you are given the following information about the default-free, coupon-paying yield curve: a. Use arbitrage to determine the yield to maturity of a two-year, zero-coupon bond. b. What is the zero-coupon yield curve for years 1 through 4? 8-26. Explain why the expected return of a corporate bond does not equal its yield to maturity. 8-27. Grummon Corporation has issued zero-coupon corporate bonds with a five-year maturity. Investors believe there is a 20% chance that Grummon will default on these bonds. If Grummon does default, investors expect to receive only 50 cents per dollar they are owed. If investors require a 6% expected return on their investment in these bonds, what will be the price and yield to maturity on these bonds? 8-28. The following table summarizes the yields to maturity on several one-year, zero-coupon securities: a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? b. What is the credit spread on AAA-rated corporate bonds? c. What is the credit spread on B-rated corporate bonds? d. How does the credit spread change with the bond rating? Why? . 8-29. Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7% (annual coupon payments) and a face value of $1000. Andrew believes it can get a rating of A from Standard and Poor’s. However, due to recent financial difficulties at the company, Standard and Poor’s is warning that it may downgrade Andrew Industries bonds to BBB. Yields on A-rated, long-term bonds are currently 6.5%, and yields on BBB-rated bonds are 6.9%. a. What is the price of the bond if Andrew maintains the A rating for the bond issue? b. What will the price of the bond be if it is downgraded? 8-30. HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1000 and a coupon rate of 6.5% (annual payments). The following table summarizes the yield to maturity for five-year (annualpay) coupon corporate bonds of various ratings: a. Assuming the bonds will be rated AA, what will the price of the bonds be? b. How much total principal amount of these bonds must HMK issue to raise $10 million today, assuming the bonds are AA rated? (Because HMK cannot issue a fraction of a bond, assume that all fractions are rounded to the nearest whole number.) c. What must the rating of the bonds be for them to sell at par? d. Suppose that when the bonds are issued, the price of each bond is $959.54. What is the likely rating of the bonds? Are they junk bonds? 8-31. A BBB-rated corporate bond has a yield to maturity of 8.2%. A U.S. Treasury security has a yield to maturity of 6.5%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at a rate of 7% and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds? Appendix Problems A.1–A.4 refer to the following table: A.1. What is the forward rate for year 2 (the forward rate quoted today for an investment that begins in one year and matures in two years)? A.2. What is the forward rate for year 3 (the forward rate quoted today for an investment that begins in two years and matures in three years)? What can you conclude about forward rates when the yield curve is flat? A.3. What is the forward rate for year 5 (the forward rate quoted today for an investment that begins in four years and matures in five years)? A.4. Suppose you wanted to lock in an interest rate for an investment that begins in one year and matures in five years. What rate would you obtain if there are no arbitrage opportunities? A.5. Suppose the yield on a one-year, zero-coupon bond is 5%. The forward rate for year 2 is 4%, and the forward rate for year 3 is 3%. What is the yield to maturity of a zero-coupon bond that matures in three years? Lecture Seven - Valuing Stocks 9-1. Assume Evco, Inc., has a current price of $50 and will pay a $2 dividend in one year, and its equity cost of capital is 15%. What price must you expect it to sell for right after paying the dividend in one year in order to justify its current price? 9-2. Anle Corporation has a current price of $20, is expected to pay a dividend of $1 in one year, and its expected price right after paying that dividend is $22. a. What is Anle’s expected dividend yield? b. What is Anle’s expected capital gain rate? c. What is Anle’s equity cost of capital? 9-3. Suppose Acap Corporation will pay a dividend of $2.80 per share at the end of this year and $3 per share next year. You expect Acap’s stock price to be $52 in two years. If Acap’s equity cost of capital is 10%: a. What price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock for two years? b. Suppose instead you plan to hold the stock for one year. What price would you expect to be able to sell a share of Acap stock for in one year? c. Given your answer in part (b), what price would you be willing to pay for a share of Acap stock today, if you planned to hold the stock for one year? How does this compare to you answer in part (a)? 9-4. Krell Industries has a share price of $22 today. If Krell is expected to pay a dividend of $0.88 this year, and its stock price is expected to grow to $23.54 at the end of the year, what is Krell’s dividend yield and equity cost of capital? 9-5. NoGrowth Corporation currently pays a dividend of $2 per year, and it will continue to pay this dividend forever. What is the price per share if its equity cost of capital is 15% per year? 9-6. Summit Systems will pay a dividend of $1.50 this year. If you expect Summit’s dividend to grow by 6% per year, what is its price per share if its equity cost of capital is 11%? 9-7. Dorpac Corporation has a dividend yield of 1.5%. Dorpac’s equity cost of capital is 8%, and its dividends are expected to grow at a constant rate. a. What is the expected growth rate of Dorpac’s dividends? b. What is the expected growth rate of Dorpac’s share price? 9-8. Kenneth Cole Productions (KCP), suspended its dividend at the start of 2009. Suppose you do not expect KCP to resume paying dividends until 2011.You expect KCP’s dividend in 2011 to be $0.40 per year (paid at the end of the year), and you expect it to grow by 5% per year thereafter. If KCP’s equity cost of capital is 11%, what is the value of a share of KCP at the start of 2009? 9-9. DFB, Inc., expects earnings this year of $5 per share, and it plans to pay a $3 dividend to shareholders. DFB will retain $2 per share of its earnings to reinvest in new projects with an expected return of 15% per year. Suppose DFB will maintain the same dividend payout rate, retention rate, and return on new investments in the future and will not change its number of outstanding shares. a. What growth rate of earnings would you forecast for DFB? b. If DFB’s equity cost of capital is 12%, what price would you estimate for DFB stock? c. Suppose DFB instead paid a dividend of $4 per share this year and retained only $1 per share in earnings. If DFB maintains this higher payout rate in the future, what stock price would you estimate now? Should DFB raise its dividend? 9-10. Cooperton Mining just announced it will cut its dividend from $4 to $2.50 per share and use the extra funds to expand. Prior to the announcement, Cooperton’s dividends were expected to grow at a 3% rate, and its share price was $50. With the new expansion, Cooperton’s dividends are expected to grow at a 5% rate. What share price would you expect after the announcement? (Assume Cooperton’s risk is unchanged by the new expansion.) Is the expansion a positive NPV investment? . 9-11. Gillette Corporation will pay an annual dividend of $0.65 one year from now. Analysts expect this dividend to grow at 12% per year thereafter until the fifth year. After then, growth will level off at 2% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm’s equity cost of capital is 8%? 9-12. Colgate-Palmolive Company has just paid an annual dividend of $0.96. Analysts are predicting an 11% per year growth rate in earnings over the next five years. After then, Colgate’s earnings are expected to grow at the current industry average of 5.2% per year. If Colgate’s equity cost of capital is 8.5% per year and its dividend payout ratio remains constant, what price does the dividend-discount model predict Colgate stock should sell for? 9-13. What is the value of a firm with initial dividend Div, growing for nyears (i.e., until year n+ 1) at rate g1 and after that at rate g2 forever, when the equity cost of capital is r? 9-14. Halliford Corporation expects to have earnings this coming year of $3 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 50% of its earnings. It will then retain 20% of its earnings from that point onward. Each year, retained earnings will be invested in new projects with an expected return of 25% per year. Any earnings that are not retained will be paid out as dividends. Assume Halliford’s share count remains constant and all earnings growth comes from the investment of retained earnings. If Halliford’s equity cost of capital is 10%, what price would you estimate for Halliford stock? 9-15. Suppose Cisco Systems pays no dividends but spent $5 billion on share repurchases last year. If Cisco’s equity cost of capital is 12%, and if the amount spent on repurchases is expected to grow by 8% per year, estimate Cisco’s market capitalization. If Cisco has 6 billion shares outstanding, what stock price does this correspond to? 9-16. Maynard Steel plans to pay a dividend of $3 this year. The company has an expected earnings growth rate of 4% per year and an equity cost of capital of 10%. a. Assuming Maynard’s dividend payout rate and expected growth rate remains constant, and Maynard does not issue or repurchase shares, estimate Maynard’s share price. b. Suppose Maynard decides to pay a dividend of $1 this year and use the remaining $2 per share to repurchase shares. If Maynard’s total payout rate remains constant, estimate Maynard’s share price. c. If Maynard maintains the dividend and total payout rate given in part (b), at what rate are Maynard’s dividends and earnings per share expected to grow? 9-17. Benchmark Metrics, Inc. (BMI), an all-equity financed firm, just reported EPS of $5.00 per share for 2008. Despite the economic downturn, BMI is confident regarding its current investment opportunities. But due to the financial crisis, BMI does not wish to fund these investments externally. The Board has therefore decided to suspend its stock repurchase plan and cut its dividend to $1 per share (vs. almost $2 per share in 2007), and retain these funds instead. The firm has just paid the 2008 dividend, and BMI plans to keep its dividend at $1 per share in 2009 as well. In subsequent years, it expects its growth opportunities to slow, and it will still be able to fund its growth internally with a target 40% dividend payout ratio, and reinitiating its stock repurchase plan for a total payout rate of 60%. (All dividends and repurchases occur at the end of each year.) Suppose BMI’s existing operations will continue to generate the current level of earnings per share in the future. Assume further that the return on new investment is 15%, and that reinvestments will account for all future earnings growth (if any). Finally, assume BMI’s equity cost of capital is 10%. a. Estimate BMI’s EPS in 2009 and 2010 (before any share repurchases). b. What is the value of a share of BMI at the start of 2009? 9-18. Heavy Metal Corporation is expected to generate the following free cash flows over the next five years: After then, the free cash flows are expected to grow at the industry average of 4% per year. Using the discounted free cash flow model and a weighted average cost of capital of 14%: a. Estimate the enterprise value of Heavy Metal. b. If Heavy Metal has no excess cash, debt of $300 million, and 40 million shares outstanding, estimate its share price. 9-19. IDX Technologies is a privately held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2008 you initiate discussions with IDX’s founder about the possibility of acquiring the business at the end of 2008. Estimate the value of IDX per share using a discounted FCF approach and the following data: ? Debt: $30 million ? Excess cash: $110 million ? Shares outstanding: 50 million ? Expected FCF in 2009: $45 million ? Expected FCF in 2010: $50 million ? Future FCF growth rate beyond 2010: 5% ? Weighted-average cost of capital: 9.4% 00 9-21. Consider the valuation of Kenneth Cole Productions in Example 9.7. a. Suppose you believe KCP’s initial revenue growth rate will be between 4% and 11% (with growth slowing in equal steps to 4% by year 2011). What range of share prices for KCP is consistent with these forecasts? b. Suppose you believe KCP’s EBIT margin will be between 7% and 10% of sales. What range of share prices for KCP is consistent with these forecasts (keeping KCP’s initial revenue growth at 9%)? c. Suppose you believe KCP’s weighted average cost of capital is between 10% and 12%. What range of share prices for KCP is consistent with these forecasts (keeping KCP’s initial revenue growth and EBIT margin at 9%)? d. What range of share prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously? 9-22. You notice that PepsiCo has a stock price of $52.66 and EPS of $3.20. Its competitor, the Coca-Cola Company, has EPS of $2.49. Estimate the value of a share of Coca-Cola stock using only this data. 9-23. Suppose that in January 2006, Kenneth Cole Productions had EPS of $1.65 and a book value of equity of $12.05 per share. a. Using the average P/E multiple in Table 9.1, estimate KCP’s share price. b. What range of share prices do you estimate based on the highest and lowest P/E multiples in Table 9.1? c. Using the average price to book value multiple in Table 9.1, estimate KCP’s share price. d. What range of share prices do you estimate based on the highest and lowest price to book value multiples in Table 9.1?
Question_Doc13_15Dec_8th Question_Doc13_15Dec_8th Question 28)The twin economic problems of the U.S. health care industry are the A) rising health care costs and the declining quality of health care services. B) rising health care costs and the rising malpractice insurance costs. C) rising health care costs and the moral hazard problem in health care services. D) declining rate of immunization rates and the rising malpractice insurance costs. 29)In the year 2010, the United States spent about A)16 percent of GDP on health care. B)100 percent of GDP on health care. C)6 percent of GDP on health care. D)2 percent of GDP on health care. 30)Currently less than ________ of all health care spending is paid by individuals. A) 60 percent. B) 35 percent. C) 20 percent. D) 5 percent. 31)Which of the following is NOT a reason for the increase in health care costs? A) the aging of the population B) the implementation of new technologies C) the increase in third party payments D) the decrease in the fertility rate 32)The federal government and insurance companies are examples of third party A) payers for health care. B) users of health care. C) providers of health care. D) observers of health care. 33)Since the 1930s, out-of-pocket payments for health care have A)declined from about 50 to 30 percent of total payments. B)declined from about 95 to 20 percent of total payments. C)declined from about 70 to 30 percent of total payments. D)not changed and remain at 70 percent of total payments. 34)Which country has the highest per capita health care expenditures in the world? A) Canada B) France C) United States D) Japan 35)The health care market in the United States is characterized by A)considerable government involvement. B)third-party payment of health care costs. C)asymmetric information between providers and consumers. D)all of the above 36)Joseph decides to join the Big State University's football team when he learns that his health insurance will pay for any subsequent injury. This illustrates A) a moral hazard problem. B) monopolistic behavior. C) a symmetric information problem. D) oligopolistic behavior. 37)A major benefit of a health savings account is that it A)combats moral hazard. B)means more health care services will be demanded. C)eliminates rising health care costs. D)creates the incentive to see a doctor regularly. 38) In insurance markets, moral hazard occurs when the behavior of A)the insured person changes in a way that raises costs for the insurer, since the insured person no longer bears the full costs of that behavior. B)the insurer changes in a way that raises costs for the insured person, since the insurer no longer bears the full costs of that behavior. C)the insured person changes in a way that eliminates rising health care costs for the insurer, since the insured person no longer bears the full costs of that behavior. D)the insured person has an incentive to under consume medical services, simply because the insured person no longer bears the full cost of medical services. 39) As a result of moral hazard, A)both physicians and hospitals order more procedures. B)physicians and hospital administrators have no incentive to raise costs. C)patients increasingly have to worry about the expense of operations and other medical procedures. D)both physicians and hospitals have a financial interest in trying to keep hospital costs down. 40)All of the following are key features of the new the federal government's national health care program EXCEPT A) people must either purchase health insurance or pay a fine to the federal government. B) a young person in good health can opt not to purchase health insurance without penalty. C) firms with at least 50 employees must either provide health insurance or pay fines when uninsured employees receive tax subsidies to purchase insurance. D) Government-directed exchanges will assist in matching individuals and small businesses with health insurance policies that satisfy government requirements. 41)Which of the following is an individual mandate in the new the federal government's new national health care program? A) Under the new program, the federal government will coordinate the establishment of health insurance exchanges. B) Firms with at least 50 employees must either provide health insurance or pay fines when uninsured employees receive tax subsidies to purchase insurance. C) A tax rate of 3.8 percent will be assessed on nearly all earnings above $200,000 per year for individuals and above $250,000 per year for married couples. D) Nearly all U.S. residents must either purchase health insurance coverage or pay a fine of up to $750 per year for an individual (up to $2,250 per year for a family). 42)Which of the following is an employer mandate in the new the federal government's new national health care program? A) Under the new program, the federal government will coordinate the establishment of health insurance exchanges. B) A tax rate of 3.8 percent will be assessed on nearly all earnings above $200,000 per year for individuals and above $250,000 per year for married couples. C) Firms with at least 50 employees must either provide health insurance or pay fines when uninsured employees receive tax subsidies to purchase insurance. D) Nearly all U.S. residents must either purchase health insurance coverage or pay a fine of up to $750 per year for an individual (up to $2,250 per year for a family). 43)How will the new federal government's new national health care program be funded? A)The federal government will charge all participants of health insurance exchanges 3.8%. B)Firms with at least 50 employees must pay an annual fine of up to $750 per employee regardless of coverage. C)A tax rate of 3.8 percent will be assessed on nearly all earnings above $200,000 per year for individuals and above $250,000 per year for married couples. D)Nearly all U.S. residents will pay a fine of up to $750 per year for an individual (up to $2,250 per year for a family) regardless of coverage. 44) The new federal government's national health care program imposes the following regulations on health care insurers EXCEPT A)health insurers must cover all who apply, including people who already have health problems. B)all new plans must cover certain preventive services such as mammograms and colonoscopies but must be paid 100% by patients. C)a ceiling is imposed on the rate of increase in health insurance prices charged to elderly people. D)insurance companies will be prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays. 45)Government agencies to which the national health care program assigns the task of assisting individuals, families, and small businesses in identifying health insurance policies to purchase are known as A) health care exchanges. B) markets for health care. C) health insurance regulations. D) health insurance mandates. 46)Which of the following is NOT a subsidy in the new the federal government's new national health care program? A) Families with incomes up to 133% of the federal poverty level are eligible for federal Medicaid coverage. B) Families with incomes up to 400% of the federal poverty level are eligible for thousands of dollars in tax subsidies per year (amounts vary with family incomes). C) Tax credits are available to businesses providing health insurance to 25 or fewer workers and paying annual salaries averaging no more than $50,000. D) A special subsidy rate of 3.8% is applied to nearly all income earnings above $200,000 for individuals or $250,000 for married couples. 47)Once the national health care program goes into effect and more people will pay fewer of their health care expenses out of their own pockets than they did previously, we can expect A) the quantity of health care services demanded will increase. B) the quantity of health care services demanded will decrease. C) the quantity of health care services supplied will increase. D) the quantity of health care services supplied will decrease. 48)Once the national health care program goes into effect, we can expect A) total expenditures on health care will decrease. B) more individuals will have more incentives to make decisions that promote better health. C) total expenditures on health care will increase. D) moral hazard will decrease. 49)Once the national health care program goes into effect, we can expect A)the quantity of health care services supplied will increase. B)total expenditures on health care will decrease. C)more individuals will pay more out of pocket expenses. D)moral hazard will increase. 50)The effects of the national health care program on labor markets will A) lower the effective wage rate that they must pay for each unit of labor. B) decrease the marginal revenue product of labor. C) increase the marginal revenue product of labor. D) move upward along their downward-sloping marginal-product-of-labor curve. 51)The effects of the national health care program on labor markets will A)increase the quantity supplied of labor. B)decrease the quantity supplied of labor. C)increase the quantity demanded for labor. D)decrease the quantity demanded for labor. 52)The effects of the national health care program on goods and services markets will A) increase the marginal cost of the firm. B) increase the quantity produced of the firm. C) consumers will pay lower prices for many goods and services. D) decrease the quantity demanded for all goods and services. 53)Based on most observations, what are the effects on government budgets from the national health care program? A) Tax revenues will not flow into the new program immediately. B) The federal government ultimately will have to search for ways to reduce its health care expenditures . C) Federal government expenditures on the program are being phased in immediately. D) the federal government ultimately will lower taxes since the program's cost will decline over time. 54)Why have health care costs risen so much in recent years? 55) "It is difficult to compare over time health care expenditures, costs, and output." Do you agree or disagree? Why? 56) How is moral hazard related to health care?
general quiz data bank general quiz data bank Question Question 1.1. ( B) The original impetus of HMO development came from which of the following? (Points : 5)Providers seeking patient revenuesConsumers seeking access to healthcareEmployersAll of the aboveNone of the aboveQuestion 2.2. (TCO A) Key common characteristics of PPOs include _____.(Points : 5)selected provider panelsnegotiated payment ratesconsumer choiceutilization managementAll of the aboveA, B, and D onlyQuestion 3.3. (TCO B) Basic elements of include _____.(Points : 5)hospital privilegesmalpractice historymedical licensecontinuing medical education (CME)All of the aboveA, B, and C onlyQuestion 4.4. (TCO D) A common financial risk arrangement used as a performance-based incentive is _____.(Points : 5)carve-outswithholdsper diemFFSQuestion 5.5. (TCO B) Which of the following forms of hospital reimbursement contain no elements of risk sharing by the hospital? (Points : 5)CapitationDRGsPer diemSliding scale FFSBoth C and DQuestion 6.6. (TCO C) Common sources of information to trigger DM include _____.(Points : 5)claimslaboratory testsreferrals from inpatient care coordinatorspharmacy dataelectronic medical recordsAll of the aboveA through D onlyQuestion 7.7. (TCO C) One potential negative consequence of drug formularies with high copayments is _____.(Points : 5)increased use of generic drugsincreased use of brand drugscopayments may be a barrier to adherence.decreased use of the most cost-effective medicationsQuestion 8.8. (TCO C) Which of the following are components of a strong MCO prevention program? (Points : 5)Member benefitsServices for members, such as healthContracts with providersPublic policiesA and C onlyA, B, C, and DQuestion 9.9. (TCO D) This federal law has established specific, enforceable regulations regarding the standardization of electronic transactions and code sets for procedures and diagnoses. (Points : 5)OCRHEDISEMTALAQuestion 10.10. (TCO D) Employees who are engaged in their healthcare will do the following except what? (Points : 5)Have better compliance with health intervention programsHave lower healthcare costsHave higher productivityHave more direct reportsQuestion 11.11. (TCO D) Which of the following does HIPAA regulate? (Points : 5)Electronic communications between payors and providersPortability and access standardsGuaranteed renewability of group coverageAll of the aboveQuestion 12.12. (TCO D) Which of the following clauses states that the provider agrees not to sue or assert any claims against the enrollee for services covered under the contract? (Points : 5)Flow down clauseNo-balance-billing clauseForce majeure clauseHold-harmless clauseQuestion 1.1. (TCO B) The original impetus of HMO development came from which of the following? (Points : 5)Providers seeking patient revenuesConsumers seeking access to healthcareEmployersAll of the aboveNone of the aboveQuestion 2.2. (TCO A) Key common characteristics of PPOs include _____.(Points : 5)selected provider panelsnegotiated payment ratesconsumer choiceutilization managementAll of the aboveA, B, and D onlyQuestion 3.3. (TCO B) Basic elements of credentialing include _____.(Points : 5)hospital privilegesmalpractice historymedical licensecontinuing medical education (CME)All of the aboveA, B, and C onlyQuestion 4.4. (TCO D) A common financial risk arrangement used as a performance-based incentive is _____.(Points : 5)carve-outswithholdsper diemFFSQuestion 5.5. (TCO B) Which of the following forms of hospital reimbursement contain no elements of risk sharing by the hospital? (Points : 5)CapitationDRGsPer diemSliding scale FFSBoth C and DQuestion 6.6. (TCO C) Common sources of information to trigger DM include _____.(Points : 5)claimslaboratory testsreferrals from inpatient care coordinatorspharmacy dataelectronic medical recordsAll of the aboveA through D onlyQuestion 7.7. (TCO C) One potential negative consequence of drug formularies with high copayments is _____.(Points : 5)increased use of generic drugsincreased use of brand drugscopayments may be a barrier to adherence.decreased use of the most cost-effective medicationsQuestion 8.8. (TCO C) Which of the following are components of a strong MCO prevention program? (Points : 5)Member benefitsServices for members, such as health risk assessmentsContracts with providersPublic policiesA and C onlyA, B, C, and DQuestion 9.9. (TCO D) This federal law has established specific, enforceable regulations regarding the standardization of electronic transactions and code sets for procedures and diagnoses. (Points : 5)OCRHEDISHIPAAEMTALAQuestion 10.10. (TCO D) Employees who are engaged in their healthcare will do the following except what? (Points : 5)Have better compliance with health intervention programsHave lower healthcare costsHave higher productivityHave more direct reportsQuestion 11.11. (TCO D) Which of the following does HIPAA regulate? (Points : 5)Electronic communications between payors and providersPortability and access standardsGuaranteed renewability of group coverageAll of the aboveQuestion 12.12. (TCO D) Which of the following clauses states that the provider agrees not to sue or assert any claims against the enrollee for services covered under the contract? (Points : 5)Flow down clauseNo-balance-billing clauseForce majeure clauseHold-harmless clause
Kaplan gb520 Unit 2 Kaplan gb520 Unit 2 Question Case Study Analysis Read the Harvard Business Case Study for Unit 2: DeLong, T.J., Tandon, J., Rengaswamy, G. (October, 2006) Infosys: Strategic human resource management (Case Study). Retrieved from Harvard Business. Visit Harvard Business Online to acquire the electronic version of the article. Prepare a case analysis on the topic of Traditional versus Strategic HRM and Its Effectiveness for Organizational Success. The case analysis should be a minimum of 3-pages long, double-spaced. Check for correct spelling, grammar, punctuation, mechanics, and usage. Citations should use APA style. Case Analysis Question: What is Strategic Human Resources Management and how does it link the people with the strategic needs of the business? Your analysis of this case and your written submission should reflect an understanding of the critical issues of the case; integrate the material covered in the text and present concise and well-reasoned justifications for the stance that you take. Case Analysis Criteria Your case analysis should consist of: ? A brief analysis of the situation and pending decision problem, as presented in the case, and as relevant to your answer. This should be exceptionally brief and you should assume the person reading the Assignment is familiar with the details of the case. ? Identification of the major issues surrounding the organization or individuals involved with the organization. ? Identification of alternate courses of action to address the issues identified. ? The decision or recommendation for action, with the appropriate supporting arguments. ? The Case Question is designed to guide the direction of your analysis in the case. Your analysis should address and ultimately answer the question. You may discuss your Case Analysis Assignment with the class and Team Members (and you are encouraged to on the Discussion Board or in the Team Area), but you must submit your own original work. Case Analysis Tips Avoid common errors in case analyses, such as: 1. Focusing too heavily on minor issues. 2 | Page 2. Lamenting because of insufficient data in the case and ignoring creative alternatives. 3. Rehashing of case data — you should assume the reader knows the case. 4. Not appropriately evaluating the quality of the case's data. 5. Obscuring the quantitative analysis, making it difficult to understand. Typical “minus (-)” grades result from submissions that… • are late. • are not well integrated and lack clarity. • do not address timing issues. • do not recognize the cost implications or are not practical. • get carried away with personal biases and are not pertinent to the key issues. • are not thoroughly proofread and corrected. Case Analysis Submission Before you submit your Case Analysis, you should save your work on your computer in a location that you will remember. Save the document using the naming convention: Username_Unit2_CaseAnalysis.doc. Make sure your document includes: • Your Name • Date • Course Name and Section Number • Unit Number • Case Name • Page Numbers When you are ready, submit your paper to the Unit 2 Case Analysis Dropbox.
columbia Southern BBA 4951 unit III case study columbia Southern BBA 4951 unit III case study Question Unit III Case StudyComplete the Assurance of Learning Exercises 6A and 6B on page 205 of the textbook. Use the completed SWOT and SPACE matrices to draw conclusions regarding both the long term and short term strategies you would recommend in light of your findings. Summarize in a two-page APA formatted paper. NOTE: It is not necessary to consult other studentsto complete these exercises in the textbook.
Plastics, Inc. is a company that operates in 4 different divisions. The following Plastics, Inc. is a company that operates in 4 different divisions. The following Question Plastics, Inc. is a company that operates in 4 different divisions. The following information relating to each segment is available for 2013.Sales Cost of Operating Total Operating IdentifiableRevenue Goods Sold Expenses Expenses Profit (Loss) AssetsBottles $6,000 $26,000 $8,000 $34,000 $31,000 $66,000Containers$95,000 $62,000 $48,000 $110,000 ($15,000) $80,000Dollhouses$620,000 $353,000 $140,000 $493,000 $127,000 $640,000Silverware$18,000 $8,000 $6,500 $14,500 $3,500 $36,000Sales of Segments "Containers" & "Dollhouses" included intersegment sales of $30,000 and $150,000 respectively.Required: Determine which of the segments are reportable based on the following:Revenue testOperating Profit (Loss) TestIdentifiable Assets TestProblem 2:The following information pertains to Walrus Inc.Cash $60,000Accounts receivable 170,000Inventory 100,000Plant assets (net) 582,000Total assets $912,000Accounts payable $110,000Accrued taxes and expenses payable 42,000Long-term debt 120,000Common stock ($10 par) 260,000Paid-in capital in excess of par 50,000Retained earnings 330,000Total equities $912,000Net sales (all on credit) $2,000,000Cost of goods sold 1,400,000Net income 120,000Required:Compute the following:(ignore Average for balance sheet accounts)(a) Current ratio(b) Inventory turnover(c) Receivables turnover(d) Book value per share(e) Earnings per share(f) Debt to total assets(g) Profit margin on sales(h) Return on common stock equity
generel data quiz generel data quiz Question 1. Question : (TCO 5) What is the forecast for May, based on a weighted moving average applied to the following past-demand data and using the weights of 3, 2, and 1 (largest weight is for most recent data)? Nov. Dec. Jan. Feb. Mar. Apr. 91 140 98 110 123 101 Student Answer: 44.1 110.7 108.8 109.83 Instructor Explanation: W/M/A = [(3 x 101) + (2 x 123) + (1 x 110)]/6 = [303 + 246 + 110]/6 = 659/6 = 109.83 (See Formula 4-2 & example that follows, Chapter 4, pages 137-139) Points Received: 0 of 3 Comments: 2. Question : (TCO 5) In May, the actual product demand was 195 units. For this month, 200 units had been forecasted. Using exponential smoothing with an alpha of 0.3, determine the June forecast. Points Received: 3 of 3 Comments: 3. Question : (TCO 5) Weekly sales of 10-grain bread at the local Whole Foods Market are in the table below. Based on this data, forecast Week 9 using a 3-week moving average. Week Demand 1 415 2 389 3 420 4 382 5 410 6 432 7 380 8 420 Student Answer: 407.3 422.8 380.22 410.66 Instructor Explanation: Points Received: 3 of 3 Comments: 4. Question : (TCO 7) Which of the following helps operations managers focus on the trivial few and the critical many? Student Answer: Value analysis Value engineering Financial analysis Product-by-value analysis None of the above Instructor Explanation: Chapter 5, page 156 Points Received: 0 of 3 Comments: 5. Question : (TCO 7) Which of the following moments of truth exemplifies the customer's standard expectations? Student Answer: Your advisor made you wait, even though you had an appointment. You had to visit once to reach your academic advisor. Your advisor was competent, helpful, and understanding. Your advisor failed to keep his or her appointment with you Instructor Explanation: Figure 5.13, Chapter 5, page 175 Points Received: 0 of 3 Comments: 6. Question : (TCO 7) Forecasts are usually classified by time horizon into three categories. What are they? Student Answer: = Short-range, medium-short, and long-range Finance/accounting, marketing, and operations Strategic, tactical, and operational Exponential smoothing, regression, and time series Long-range, medium-range, and short-range Instructor Explanation: Chapter 3, page 104 Points Received: 0 of 3 Comments: 7. Question : (TCO 7) Which of the following does not make products more environmentally friendly? Student Answer: Using less materials Less recycled materials Using less energy Ability to recycle product All of the above Instructor Explanation: Chapter 5, page 166 Points Received: 0 of 3 Comments: 8. Question : (TCO 7) Reducing costs by using existing or standard components is part of _____. Student Answer: specialized components on each project putting each product into a separate group increasing raw material purchases the ability to recycle product group technology Instructor Explanation: Chapter 5, page 172 Points Received: 3 of 3 Comments: 9. Question : (TCO 5) What is the fundamental difference between cycles and seasonality? Student Answer: How often the patterns are changed Magnitude of the variation Ability to attribute the pattern to a cause All of the above None of the above Instructor Explanation: Chapter 4, page 108 Points Received: 0 of 3 Comments: 10. Question : (TCO 6) Which of these statements best describes computer-aided design (CAD)? Student Answer: It is the interactive use of computers to design a product and prepare engineering documentation. The use of special computer programs to direct and control manufacturing equipment. It is the ability to depict objects in three-dimensional form. It is a visual form of communication in which images substitute for the real thing. Instructor Explanation: Chapter 5, page 164 Points Received: 0 of 3 Comments: Page: 1 * Times are displayed in (GMT-07:00) Mountain Time (US & Canada) Continue part 2 1. Question : (TCO 7) Identify the specific guidelines that can help an operations manager achieve environmentally friendly designs. Student Answer: Instructor Explanation: Points Received: 0 of 6 Comments: Read page 167 2. Question : (TCO 7) List the five advantages of successful implementation of group technology. Student Answer: Instructor Explanation: Points Received: 6 of 6 Comments: 3. Question : (TCO 5) Describe the differences between moving averages and exponential smoothing. Points Received: 6 of 6 Comments: 4. Question : (TCO 5) Describe the three forecasting time horizons and identify the benefits of using each. Student Answer: Instructor Explanation: Points Received: 6 of 6 Comments: 5. Question : (TCO 6) What are the differences between value analysis and value engineering? Student Answer: Instructor Explanation: Points Received: 6 of 6 Comments: Page: 2 * Times are displayed in (GMT-07:00) Mountain Time (US & Canada)
Chapter 6 Managing Employee Separations, Downsizing, and Outplacement Chapter 6 Managing Employee Separations, Downsizing, and Outplacement Question 76. When implementing a layoff, employees should first be informed: a) by the HR department in a large meeting. b) in writing through the mail. c) by their supervisor in writing. d) in a work unit meeting with HR present. e) by their supervisor in face-to-face meetings. 77. The information given in the initial meeting between a manager and an employee who is being laid off should include: a) the reasons why the employee is being laid off. b) a brief period of time for the employee to vent frustrations and debate the layoff. c) appreciation for what the employee has contributed to the business, if appropriate. d) how much severance pay will be provided. e) c and d 78. While no time is a good time for a termination, the best time seems to be: a) midweek. b) Friday afternoon, after 3 p.m. c) the beginning of the workweek so employees have time to plan. d) just after an employee comes back from vacation. e) on the weekend, so there is plenty of time for employees to ask questions. 79. As the head of the HR department for a large technology-production company, you have been notified that the company is preparing for a mass lay-off. Which of the following should be your greatest priority in preparing for the layoff? a) Maintaining privacy and delaying notification of the layoff to employees until the latest possible moment. b) Limiting contact with the media. c) Coordinating communication and press releases to the media. d) Organizing outplacement services. e) None of the above 80. When implementing a layoff, managers sometimes forget that: a) they may need to rehire these laid-off employees. b) it is usually appropriate to escort laid-off employees off the premises. c) they need to develop plans for the “survivors” of the layoff. d) there are hidden labor costs not reduced through layoffs. e) they need to plan for outplacement of the laid-off employees. 81. After a layoff, it is not uncommon to see ___ among the remaining workers. a) a sharp increase in innovation b) greater diversity c) gratitude d) increased absenteeism e) little change in quality or productivity 82. Management can minimize problems with the remaining workforce after a layoff by: a) developing special programs for survivors providing emotional support. b) minimizing the “rumor mill” by keeping communication to a minimum. c) initiating close supervision of the remaining workers, watching for any problems that may arise. d) getting the remaining workers involved in the transition process by getting their ideas. e) documenting the reasons for release and aggressively preparing for litigation. 83. Companies provide outplacement to terminated workers for a number of reasons, such as: a) reducing problems with the remaining workforce. b) meeting federal requirements to do so if the company releases more than 100 workers. c) reducing their unemployment compensation tax by reducing the time people are out of a job. d) reducing absenteeism among remaining workers. e) reducing morale problems for laid-off workers and helping them find another job. 84. The use of outplacement services among large corporations: a) is in significant decline due to the expense. b) has become a global management practice used by corporations around the world. c) has caused several to take the process “in-house” and use their own HRM staff. d) is entirely a U.S. management practice. e) is not known among Japanese corporations. 85. Horrace has been asked to design a job-search assistance program as part of a company’s outplacement services. Which of the following might he include in the program? a) Resume writing. b) Career planning. a) Job negotiation skills. b) Interviewing skills. c) All of the above CASE QUESTIONS Case 6.1 Your company, Painting Products, Inc., is reviewing employee turnover. The CEO and VP of Operations are arguing. The CEO doesn’t see what the big deal is: the company can capture savings from reduced salary/wages and benefits this quarter. Unemployment insurance is not impacted because people are quitting. The job market is tight so the company gets more walk-in applicants and mailed-in resumes than it needs. The VP of Operations argues that he can’t keep absorbing the productivity losses due to employees’ need for orientation and learning time on the job. He admits that new hires are bringing fresh ideas and his better-performing people do tend to stay and move up as a consequence of this turnover, but he’s still frustrated with the loss of productivity. 86. Refer to Case 6.1. What category of employee replacement costs is the CEO not considering? a) Recruitment costs. b) Training costs. c) Separation costs. d) Damage to the corporate image. e) Selection costs. 87. Refer to Case 6.1. The VP of Operations is concerned about what category of employee separation costs? a) Recruitment costs. b) Training costs. c) Separation costs. d) Damage to the corporate image. e) Selection costs. 88. Refer to Case 6.1. What benefit is the VP of Operations getting from the turnover problem? a) Reduced labor costs. b) Lower training costs. c) Increased innovation. d) Greater EEO-related diversity. e) Higher productivity. Case 6.2 Your firm is suffering an economic downturn, and it appears you need to reduce your workforce. The managers are debating the costs and benefits of various employee separations. Some managers argue that the company needs to do it now and shorten the pain. They need to cut both management and labor. The cuts need to be made in such a way that the scope of the company and its markets are not affected; they just need to do more with fewer people. Other managers want to take a long-term, less traumatic approach. They believe the company has time to think through the problems and reduce the workforce gradually, rather than with sudden cuts. They point out that 35% of the workforce is over age 62. The VP of HR, LaTisha, wants the least disruptive reduction process possible. She’s just finished a major labor negotiation and fight with the union and is not ready for another. She points out that turnover has been fairly high. Along with looking at workforce reductions, she wants to know why people are leaving the company voluntarily. 89. Refer to Case 6.2. The managers who want to make the reduction now seem to be arguing for: a) a layoff. b) downsizing. c) rightsizing. d) discharges. e) early retirements. 90. Refer to Case 6.2. What relatively quick, but less traumatic, reduction strategy is suggested by the make-up of the workforce? a) Rightsizing. b) Retraining. c) Discharging low performers. d) An early retirement program. e) Job redesigns. 91. Refer to Case 6.2. LaTisha’s observations open the door for what other reduction strategies? a) The use of employment policies like attrition and a hiring freeze. b) Instituting changes in pay and benefit policies. c) Job redesign. d) Additional training or cross-training. e) None of the above 92. Refer to Case 6.2. To answer LaTisha’s question about why people are leaving, the company needs to institute: a) outplacement services for separated workers. b) new training. c) a calculation of the real costs of employee separations. d) exit interviews. e) a layoff. Case 6.3 Terra Alta, Inc., an employer of some 15,000 employees worldwide, wants to reduce its workforce through an early retirement program. They have hired you to put the program together and implement it. This will be a one-time offer. They want employees over age 58 to be eligible, but they don’t want to lose key older employees. Terra Alta wants a fairly accurate estimate of how many employees will take part in the program. Terra Alta wants a legal and humane program. They do not want to be caught up in any litigation. They want employees to have an accurate picture of their future if they take part in the early retirement program. 93. Refer to Case 6.3. Given Terra Alta’s desire to get employees to take advantage of the program, what could you recommend they do, beyond the standard, to ensure maximum participation? a) Create a formula that accelerates eligibility for retirement. b) Open a “window” that restricts eligibility. c) Give potential layoff notices to those who might hesitate to participate but are eligible. d) Offer a lump sum payment equal to 1-2 years of salary. e) Provide outplacement counseling. 94. Refer to Case 6.3. How could Terra Alta keep key older workers from leaving? a) Restrict eligibility to areas with redundant employees. b) Don’t give them potential layoff notices. c) Pull them aside and guarantee them their jobs. d) Fine tune the eligibility requirements by lowering the amount of seniority required to participate. e) Put a hiring freeze into place. 95. Refer to Case 6.3. To avoid any legal problems, what would you recommend? a) Tell managers not to treat older workers any differently than they have in the past. b) Offer minority and women employees larger severance packages. c) Give at least 60 days advance warning by placing potential layoff notices in their pay voucher packets. d) Explain to these workers what it’s like out there if they retire or try to go into business for themselves. e) Implement a hiring freeze at the same time as you offer the early retirement program. 96. Refer to Case 6.3. How could Terra Alta manage the number of people who might participate in the early retirement program? a) Take key employees aside and guarantee them their jobs. b) Fine tune the incentives if a survey shows too many will participate. c) Hire retirees back as consultants. d) Offer protected class employees less generous retirement packages. e) Build an estimate on industry data and stop the program when they get to that number.
business managment data bank business managment data bank Question 76. Preemployment drug testing produces about ____ positive (for the use of drugs) results. a) 10% b) 12% c) 4.5% d) 36% e) 8.7% 77. A study conducted by the U.S. Postal Service regarding drug testing: a) showed that drug testing is a valid predictor of job performance. b) showed that drug testing does not correlate with on-the-job performance. c) revealed that most job candidates can “beat” a drug test. d) has been struck down by the Supreme Court. e) revealed that they saved about $4 million a year in lost productivity. 78. It is generally held in the U.S. that handwriting analysis: a) is not a valid predictor of job performance. b) is valid but not reliable in predicting job performance. c) can be valid when combined with other selection tools, such as psychological testing. d) is covered by the same federal law that prohibits polygraph testing and is therefore illegal to use in a selection process. e) may create disparate impact on minorities. 79. A manager wants to combine selection tools to help him make a decision. He wants to make a preliminary selection after administering each instrument. He is using a(n) ___ strategy. a) illegal b) clinical c) statistical d) graphological e) multiple hurdle 80. An employer’s best defense against liability in a negligent hiring lawsuit is to use which of the following selection tools? a) Handwriting analysis. b) Structured interview. c) Honesty test. d) Personality test. e) Reference checks. 81. Many former employers are reluctant to give references for fear of liability if the reference keeps the former employee from getting a job. The courts have held that employers have a “qualified privilege” if the employer: a) only discusses EEO-related information. b) has personally observed the behavior he describes. c) has selection test information to support the reference. d) only gives information to an inquirer who has a job-related need to know. e) qualifies the information as “his/her opinion” and not necessarily factual. 82. One of your employees, a member of a protected class, loses his temper and assaults and injures a customer. The customer is also a member of a protected class. During the investigation, the police discover that the employee has a long history of such behavior and served jail time for assault and battery. As the employer: a) you cannot be held responsible because the employee was a member of a protected class. b) your employee’s behavior has made you liable for the injuries under the Civil Rights Act of 1991. c) you will be subject to establishing an affirmative action plan as a consequence of this incidence. d) you are probably liable for negligent hiring. e) you are liable for injuries under Executive Order 11246. CASE QUESTIONS Case 5.1 About a year ago, Pedro’s Printing was looking for a new managing editor of a specialty line of magazines. The previous editor retired after 25 years on the job. The editors and the HRM department debated about the key requirements for a new managing editor. Some felt it was knowledge of the business, others thought it was interpersonal skills to get along with the staff. A few others believed it was the ability to attract writing talent and subscribers. Finally, it was decided that HRM would screen candidates and the editors would interview finalists with HRM, but that the HRM director would make the final choice to avoid competition among the editors. Advertisements were placed nationally. A number of candidates were tested and interviewed by the HR manager, and references were checked. After a long search, a new managing editor was hired and he was a disaster. Though he was completely competent as an editor and fit well into the company’s culture, he tended to run roughshod over his staff, driving a couple of talented, up-and-coming editors to leave for jobs with competitors. He liked being an editor, and being the boss, but he did not want to solicit writers or subscribers. He offered no ideas or direction as to how to increase circulation. After 10 months the publisher let him go and began looking for a new managing editor. This time, they want to find someone who wants the job and has the right skill and personality mix. They want someone who can start quickly and doesn’t need to be trained into the company. The ability to innovate is not critical, just the ability to work hard. Due to the expense of the fiasco, money for recruiting is now tight. They also want to be certain they don’t make the same mistake a second time. 83. Refer to Case 5.1. The first challenge that HR faced in recruiting this new editor was: a) agreeing about important job characteristics. b) attracting an adequate pool of qualified applicants. c) forecasting the labor pool from which to draw applicants. d) deciding who would make the selection decision. e) deciding what recruiting source to use. 84. Refer to Case 5.1. Given the problems that the new managing editor had: a) HR should have administered a personality test as part of the selection process. b) line personnel should have made the final decision, not HR. c) they should have recruited from a college campus, rather than using advertisements. d) it is apparent that HR did not correctly identify appropriate job characteristics. e) they should have recruited through referrals rather than advertisements. 85. Refer to Case 5.1. Based on the new managing editor’s performance, it is clear that both HRM and the publisher failed to properly: a) assess his abilities. b) test his cognitive skills. c) assess his general knowledge of the publishing business. d) assess his motivation for doing the job they wanted done. e) determine his knowledge of the editing job. 86. Refer to Case 5.1. Which of the following would probably be a better source for applicants during the second search? a) Advertising again. b) An employment agency. c) College recruiting. d) Customer referrals. e) Former employees. 87. Refer to Case 5.1. The best selection tool for helping Pedro’s Printing to identify the “fit” between applicants and the firm, as well as job skill and knowledge, would have been: a) ability testing. b) personality testing. c) unstructured interviews. d) handwriting analysis. e) an assessment center. Case 5.2 You are the HRM director for a large company. Your MIS managers have just requested that you identify 10 candidates for newly created computer programming jobs. These are entry-level jobs in MIS that require a college degree. Expansion plans in production have also created a number of new entry-level jobs, as well as two new first-line supervisor jobs. Your company is doing well. Production has implemented a very successful TQM program. You have a reputation for innovation and quality. Money is tight due to aggressive expansion and marketing efforts. You have a diverse, well-balanced workforce. The president prefers to reward performance through promotion from within. However, if an employee chooses to leave the company, he or she is not eligible for rehire. An upper-level management position is open due to a retirement. Money is still tight, the company is doing well and “if it ain’t broke, don't fix it” is the president’s mentality. This is a key position, and the longer it remains open, the more likely it is that the company will begin to lose market share. There are a number of excellent candidates for this job. “Fit” with the organization is probably one of the top criteria for the selection. The president wants both peers and subordinates to be involved in the process, though he will make the final decision. He wants your advice as to the best selection tool. He wants to narrow the field quickly and work with the data as he goes along, rather than get all the information on each candidate first. 88. Refer to Case 5.2. The best recruiting source of candidates for the newly created computer programming jobs would be: a) college recruiting. b) customers. c) employment agencies. d) temporary help agencies. e) former employees. 89. Refer to Case 5.2. The first-line supervisor jobs would best be filled by: a) current employees. b) advertisements. c) referrals from current employees. d) employment agencies. e) college recruiting. 90. Refer to Case 5.2. To fill the new production jobs, your best source would be: a) advertisements. b) customers. c) college recruiting. d) former employees. e) referrals from current employees. 91. Refer to Case 5.2. Given the culture of your company and your president’s view of the business, what is your best choice for filling the upper management job? a) An external candidate. b) An employment agency. c) An internal candidate. d) Leave the position vacant for this year. e) College recruiting. 92. Refer to Case 5.2. What is your best choice of selection tool to assess your number one criterion? a) Personality test. b) Unstructured interview. c) Cognitive ability testing. d) An assessment center. e) Reference checking.
Managerial Finance – Problem Review Set – Capital Structure and Leverage Managerial Finance – Problem Review Set – Capital Structure and Leverage Question Managerial Finance – Problem Review Set – Capital Structure and Leverage 1) If a firm utilizes debt financing, an X% decline in earnings before interest and taxes (EBIT) will result in a decline in earnings per share that is larger than X. a. True b. False 2) Firm A has a higher degree of business risk than Firm B. Firm A can offset this by using less financial leverage. Therefore, the variability of both firms' expected EBITs could actually be identical. a. True b. False 3) It is possible that two firms could have identical financial and operating leverage, yet have different degrees of risk as measured by the variability of EPS. a. True b. False 4) Which of the following events is likely to encourage a company to raise its target debt ratio, other things held constant? a. An increase in the corporate tax rate. b. An increase in the personal tax rate. c. An increase in the company’s operating leverage. d. The Federal Reserve tightens interest rates in an effort to fight inflation. e. The company's stock price hits a new high. 5) The firm’s target capital structure should be consistent with which of the following statements? a. Maximize the earnings per share (EPS). b. Minimize the cost of debt (rd). c. Obtain the highest possible bond rating. d. Minimize the cost of equity (rs). e. Minimize the weighted average cost of capital (WACC). 6) Which of the following statements is CORRECT? As a firm increases the operating leverage used to produce a given quantity of output, this will a. normally lead to an increase in its fixed assets turnover ratio. b. normally lead to a decrease in its business risk. c. normally lead to a decrease in the standard deviation of its expected EBIT. d. normally lead to a decrease in the variability of its expected EPS. e. normally lead to a reduction in its fixed assets turnover ratio. 7) Reynolds Resorts is currently 100% equity financed. The CFO is considering a recapitalization plan under which the firm would issue long-term debt with a yield of 9% and use the proceeds to repurchase common stock. The recapitalization would not change the company’s total assets, nor would it affect the firm’s basic earning power, which is currently 15%. The CFO believes that this recapitalization would reduce the WACC and increase stock price. Which of the following would also be likely to occur if the company goes ahead with the recapitalization plan? a. The company’s net income would increase. b. The company’s earnings per share would decline. c. The company’s cost of equity would increase. d. The company’s ROA would increase. e. The company’s ROE would decline. 8) Vu Enterprises expects to have the following data during the coming year. What is Vu's expected ROE? Assets $200,000 Interest rate 8% D/A 65% Tax rate 40% EBIT $25,000 a. 12.51% b. 13.14% c. 13.80% d. 14.49% e. 15.21% 9) Ang Enterprises has a levered beta of 1.10, its capital structure consists of 40% debt and 60% equity, and its tax rate is 40%. What would Ang's beta be if it used no debt, i.e., what is its unlevered beta? a. 0.64 b. 0.67 c. 0.71 d. 0.75 e. 0.79 10) Firms HD and LD are identical except for their level of debt and the interest rates they pay on debt--HD has more debt and pays a higher interest rate on that debt. Based on the data given below, what is the difference between the two firms' ROEs? Applicable to Both Firms Firm HD's Data Firm LD's Data Assets $200 Debt ratio 50% Debt ratio 30% EBIT $40 Interest rate 12% Interest rate 10% Tax rate 35% a. 2.18% b. 2.29% c. 2.41% d. 2.54% e. 2.66% 11) Michaely Inc. is an all-equity firm with 200,000 shares outstanding. It has $2,000,000 of EBIT, which is expected to remain constant in the future. The company pays out all of its earnings, so earnings per share (EPS) equal dividends per shares (DPS). Its tax rate is 40%. The company is considering issuing $5,000,000 of 10.0% bonds and using the proceeds to repurchase stock. The risk-free rate is 6.5%, the market risk premium is 5.0%, and the beta is currently 0.90, but the CFO believes beta would rise to 1.10 if the recapitalization occurs. Assuming that the shares can be repurchased at the price that existed prior to the recapitalization, what would the price be following the recapitalization? a. $65.77 b. $69.23 c. $72.69 d. $76.33 e. $80.14 12) The MM model is the same as the Miller model, but with zero corporate taxes. a. True b. False 13) The major contribution of the Miller model is that it demonstrates that a. personal taxes increase the value of using corporate debt. b. personal taxes decrease the value of using corporate debt. c. financial distress and agency costs reduce the value of using corporate debt. d. equity costs increase with financial leverage. e. debt costs increase with financial leverage. 14) Which of the following statements concerning capital structure theory is NOT CORRECT? a. The major contribution of Miller's theory is that it demonstrates that personal taxes decrease the value of using corporate debt. b. Under MM with zero taxes, financial leverage has no effect on a firm’s value. c. Under MM with corporate taxes, the value of a levered firm exceeds the value of the unlevered firm by the product of the tax rate times the market value dollar amount of debt. d. Under MM with corporate taxes, rs increases with leverage, and this increase exactly offsets the tax benefits of debt financing. e. Under MM with corporate taxes, the effect of business risk is automatically incorporated because rsL is a function of rsU. 15) The Kimberly Corporation is a zero growth firm with an expected EBIT of $100,000 and a corporate tax rate of 30%. Kimberly uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. . What is the value of the firm according to MM with corporate taxes? a. $475,875 b. $528,750 c. $587,500 d. $646,250 e. $710,875 . What is the firm's cost of equity? a. 21.0% b. 23.3% c. 25.9% d. 28.8% e. 32.0% . Assume that the firm's gain from leverage according to the Miller model is $126,667. If the effective personal tax rate on stock income is TS = 20%, what is the implied personal tax rate on debt income? a. 16.4% b. 18.2% c. 20.2% d. 22.5% e. 25.0%