Meyer, Inc. is considering a very risky five-year project that has an initial outlay or cost of $70,000. The future cash inflows from its project for years 1, 2, 3, 4, and 5 are all the same at $35,000. Meyer uses the internal rate of return method to evaluate projects. Will Meyer accept the project […]
Date: September 19th, 2020
________ involves the sale of accounts receivable. A) Trust receipt loan B) Factoring C) Field warehouse arrangement D) Pledging of accounts receivable ANSWER B
Date: September 19th, 2020
Washington Industries Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $350,000. The respective future cash inflows from its five-year project for years 1 through 5 are $75,000 each year. Washington expects an additional cash flow of $50,000 in the fifth year. The firm uses the IRR method and […]
Date: September 19th, 2020
The most popular alternative to NPV for capital budgeting decisions is the ________ method. A) internal rate of return (IRR) B) payback period C) discounted payback period D) profitability index ANSWER Answer: A
Date: September 19th, 2020
Two projects intersect, in terms of NPV, at a discount rate labeled the ________. A) crossover rate B) internal rate of return C) discount rate D) yield to maturity ANSWER Answer: A
Date: September 19th, 2020
Which of the following assumptions of an ideal (or perfect) capital market most closely relates to the assumed symmetry of information set shared by all firms and all investors? a. Capital Markets are frictionless b. Homogeneous expectations c. Atomistic competition d. The firm has a fixed investment program e. Once chosen, the firm’s financing is […]
Date: September 19th, 2020
The Internal Rate of Return (IRR) Model suffers from three problems. Which of the below is NOT one of these problems? A) Comparing mutually exclusive projects B) Cumbersome computations not resolvable by the latest technology C) Incorporates the IRR as the reinvestment rate for the future cash flows D) Multiple IRRs ANSWER Answer: […]
Date: September 19th, 2020
Debt capital is less risky than equity capital because a firm is legally obligated to pay interest to bondholders but they are not legally obligated to pay dividends to preferred or common stockholders. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A ________ agreement normally states the exact conditions and procedures for the purchase of an account. A) factoring B) pledging accounts receivable C) revolving credit D) line of credit ANSWER A
Date: September 19th, 2020
Which of the statements below describes the IRR decision criterion? A) The decision criterion is to accept a project if the IRR falls below the desired or required return rate. B) The decision criterion is to reject a project if the IRR exceeds the desired or required return rate. C) The decision criterion is to […]
Date: September 19th, 2020
