Solomon Ch1 Deck 5

Question 1

CAPEX calculation

Answer 1

CAPEX= New net PPE - Old net PPE + Depreciation

Question 2

FCFE measures cash flow available to

Answer 2

equity shareholders only

Question 3

FCFE is related to FCFF how?

Answer 3

FCFE can be thought of as FCFF after interest payments are made to bondholders and any increases in borrowing have been accounted for

Question 4

The amount potentially available for dividends if the board decides is

Answer 4

FCFE

Question 5

MLP is a

Answer 5

Master Limited Partnership

Question 6

MLPs are taxed

Answer 6

using pass-through taxation if they qualify

Question 7

Are MLP’s traded on exchanges?

Answer 7

Yes and they are freely transferrable unlike LP interests

Question 8

effect of lower interest rates on consumer spending

Answer 8

increases it

Question 9

S corp can have ownership in

Answer 9

LLC’s, C-corps, Partnerships

Question 10

PIPE

Answer 10

Private Investment in Public Equity

Question 11

PIPE’s are often eventually registered so that

Answer 11

investors will not be subject to resale restrictions

Question 12

NASDAQ requires issuers of PIPE’s to notify

Answer 12

within 10 days of closing if the transaction will result in 5% or more increase in shares outstanding

Question 13

Limit to shares sold in a PIPE

Answer 13

none

Question 14

Exchanges require PIPEs that sell shares equal to more than 20% of outstanding stock

Answer 14

to sell at or above fair market price or obtain permission from shareholders to do otherwise

Question 15

Pricing for shares of PIPEs not selling more than 20% of outstanding stock

Answer 15

can be above or below market price

Question 16

If a PIPE remains unregistered

Answer 16

then shares are not freely tradable because of restrictions on investor resales

Question 17

NYSE Rule 472 prohibits research analysts from submitting

Answer 17

research reports on companies to those companies prior to publishing them

Question 18

NYSE Rule 472 allows analysts to contact companies to

Answer 18

verify facts for a report

Question 19

NYSE Rule 472 allows analysts to submit sections of report on a company to that company if

Answer 19

they have prior approval from legal or compliance and for purpose of verifying factual information

Question 20

Federal funds rate is set by

Answer 20

banks who borrow from each other

Question 21

Discount Rate is set by

Answer 21

the Fed for overnight borrowing from the Fed by banks

Question 22

Discount rate is deliberately set above

Answer 22

Fed’s target federal funds rate, to keep it as a backup tool for temporary liquidity shortages

Question 23

Highest duration security is

Answer 23

Zero coupon bond because interest and principal not paid out until bond matures

Question 24

Duration is a measure of

Answer 24

an investments sensitivity to interest rates

Question 25

ADR’s have extra expenses such as

Answer 25

banks passing on expense for currency conversion

banks deduct fees for purchasing ADR’s from dividends

Question 26

Form 13F does not require reporting of securities in

Answer 26

open ended investment companies (mutual funds).

Question 27

Warrants, options, closed end companies and other securities being managed by an institutional investor managing securities over $100M must be reported on

Answer 27

Form 13F