A company’s capital structure is made up of 40% debt and 60% common equity (both at market values). The interest rate on bonds similar to those issued by the company is 8%. The cost of equity is estimated to be 15%. The income tax rate is 40%. The company’s weighted cost of capital is A) […]
Date: September 9th, 2020
An increase in net working capital required at the beginning of an expansion project must be considered to be A) a cash inflow. B) a reallocation of assets. C) a cash outflow. D) None of the above ANSWER C
Date: September 9th, 2020
The Commons Problem arises because A) firms don’t maximize profits. B) social and private incentives are not aligned and property rights are missing. C) social cost equals private cost and property rights are missing. D) social benefit equals private benefit and property rights are missing. ANSWER B
Date: September 9th, 2020
Which of the following can reduce the number of cars imported? A) a tariff B) a quota C) a ban D) All of the above. ANSWER D
Date: September 9th, 2020
Isocost curves represent A) least cost combinations of inputs. B) combinations of inputs that can be purchased given their prices for the same total cost. C) a producers cost function. D) None of the above ANSWER B
Date: September 9th, 2020
Usually, the cost of capital for newly issued stock is ________ the cost of retained earnings. A) lower than B) higher than C) same as D) either higher or lower than ANSWER B
Date: September 9th, 2020
In the case of a good that has no exclusion and no rivalry, private markets fail because A) of free-ridership. B) this is a natural monopoly. C) profit is driven down to zero. D) the quantity produced will exceed the social optimum. ANSWER A
Date: September 9th, 2020
Your U.S.-based company is selling parts to a company in Bangladesh. If the Bangladeshi company purchases a futures contract A) the Bangladeshi company bears the exchange rate risk. B) your company bears the exchange rate risk. C) the companies share in the exchange rate risk. D) there is no exchange rate risk. ANSWER D […]
Date: September 9th, 2020
The imposition of a quota on an imported good A) shifts the demand curve down for the good. B) shifts the supply curve up for the good. C) Both A and B. D) Not enough information to determine. ANSWER B
Date: September 9th, 2020
If a risky cash flow of $10,000 is equivalent to a riskless cash flow of $9,300, the certainty equivalent factor is A) 0.93. B) 0.07. C) 1.07. D) 1.93. ANSWER A
Date: September 9th, 2020
