CF 1.4 Test

Which of the following statements regarding ESG implementation methods is most accurate?

• A. Negative screening is the most commonly applied method.
• B. Thematic investing considers multiple factors.
• C. Relative/best-in-class screening excludes industries with unfavorable ESG aspects.

• A. 0.80 days.
• B. 24.3 days.
• C. 51.7 days.

• A. Line of credit.
• B. Banker’s acceptance.
• C. Commercial paper.

An analyst gathered the following information about a company and the market:<br />Current market price per share of common stock $28.00<br />Most recent dividend per share paid on common stock (D0) $2.00<br />Expected dividend payout rate 40%<br />Expected return on equity (ROE) 15%<br />Beta for the common stock 1.3<br />Expected rate of return on the market portfolio 13%<br />Risk-free rate of return 4%<br />Using the discounted cash flow (DCF) approach, the cost of retained earnings for the company is closest to:

• A. 15.7%.
• B. 16.1%.
• C. 16.8%.

• A.
• B.
• C.

A consultant sees the following information about a publicly listed company:<br />The company has a 12-person board of directors.<br />The board is chaired by the chief executive officer (CEO) of the company.<br />All members of the audit committee are outside directors with relevant financial and accounting experience.<br />Which of the following changes would provide the greatest improvement in the corporate governance of this company?

• A. The chairman of the board should be an independent director.
• B. The company’s Vice President of Finance should be a member of the audit committee.
• C. The board of directors should have an odd number of directors to preclude tied votes.

The following information is available for a company:<br /><br />Bonds are priced at par and have an annual coupon rate of 9.2%.<br />Preferred stock is priced at $8.18 and pays an annual dividend of $1.35.<br />Common equity has a beta of 1.3.<br />The risk-free rate is 4% and the market premium is 11%.<br />Capital structure: Debt = 30%; Preferred stock = 15%; Common equity = 55%.<br />The tax rate is 35%.<br />The weighted average cost of capital (WACC) for the company is closest to:

• A. 11.5%.
• B. 14.3%.
• C. 13.4%.

Recent trends in corporate governance most likely include:

• A. focusing on the corporate governance system’s responsibility to maximize shareholder value.
• B. expanding the scope to consider the interests of employees, customers, and suppliers.
• C. increasing the diversity of corporate governance systems tailored to specific jurisdictions.

• A.
• B.
• C.

A company’s optimal capital budget most likely occurs at the intersection of the:

• A. net present value and internal rate of return profiles.
• B. marginal cost of capital and investment opportunity schedule.
• C. marginal cost of capital and net present value profiles.