According to the composite sources-and-uses data presented in Chapter 1, the main net source of funds for U.S. nonfinancial firms over the years 1980-2000 is: a. proceeds from debt offerings. b. proceeds from equity offerings. c. retained earnings (net cash flow from operations). d. sales of investments (net of increases in investments). ANSWER […]
Ace, Inc. is considering Project A and Project B, which are two mutually exclusive projects with unequal lives. Project A is an eight-year project that has an initial outlay or cost of $18,000. Its future cash inflows for years 1 through 8 are the same at $3,800. Project B is a six-year project that has […]
Allied, Inc. is considering Project A and Project B, which are two mutually exclusive projects with unequal lives. Project A is an eight-year project that has an initial outlay or cost of $180,000. Its future cash inflows for years 1 through 8 are $38,000. Project B is a six-year project that has an initial outlay […]
Manhattan, Inc. is considering an eight-year project that has an initial after-tax outlay or after-tax cost of $180,000. The future after-tax cash inflows from its project for years 1 through 8 are the same at $38,000. Manhattan uses the net present value method and has a discount rate of 11.50%. Will Manhattan accept the project? […]
An appropriate collateral for a secured short-term loan is ________. A) fixed assets B) accounts receivables C) common stock in a privately-held corporation D) bank over-draft ANSWER B
Over the 20-year period of 1980-2000, the composite dividend yield of public U.S. nonfinancial firms has generally: a. increased. b. decreased. c. remained. ANSWER B
Chase, Inc. is considering an eight-year project that has an initial after-tax outlay or after-tax cost of $180,000. The future after-tax cash inflows from its project for years 1 through 8 are the same at $35,000. Chase uses the net present value method and has a discount rate of 12%. Will Chase accept the project? […]
Poor capital structure decisions can result in a high cost of capital, thereby making some unacceptable investments acceptable. Indicate whether the statement is true or false ANSWER FALSE
Finding the equivalent annual annuity (EAA) is a good way to deal with projects with unequal lives and should only be used with mutually exclusive projects. Indicate whether the statement is true or false. ANSWER Answer: TRUE
The assignment of a discount rate to each project is an integral part of the NPV process. Indicate whether the statement is true or false. ANSWER Answer: TRUE
