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
Date: September 19th, 2020
Factoring accounts receivable is relatively an expensive source of secured short-term funds that allows firms to turn accounts receivable immediately into cash. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Dweller, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $80,000. The future cash inflows from its project are $40,000, $40,000, $30,000 and $30,000 for years 1, 2, 3 and 4, respectively. Dweller uses the net present value method and has a discount rate of 12%. Will Dweller […]
Date: September 19th, 2020
Rogue River, Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $220,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $60,000, $70,000 and $80,000. Rogue River uses the net present value method and has a discount rate of 11%. Will Rogue […]
Date: September 19th, 2020
The Discounted Payback Period method is a modified payback period model that considers how long it takes to recover the initial investment in current dollars. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
Total leverage measures the effect of fixed costs on the relationship between ________. A) sales and EBIT B) sales and EPS C) EBIT and EPS D) EBIT and dividend ANSWER B
Date: September 19th, 2020
By switching to monthly cash flows, we cannot get a more accurate estimate of the discounted payback period. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: By switching to monthly cash flows, we CAN GET a more accurate estimate of the discounted payback period.
Date: September 19th, 2020
Simpson, Inc. is considering a five-year project that has an initial after-tax outlay or after-tax cost of $80,000. The respective future cash inflows from its project for years 1, 2, 3, 4 and 5 are: $15,000, $25,000, $35,000, $45,000 and $55,000. Simpson uses the net present value method and has a discount rate of 9%. […]
Date: September 19th, 2020
At a base sales level of $400,000, a firm has a degree of operating leverage of 2 and a degree of financial leverage of 1.5. The firm’s degree of total leverage is ________. A) 3.5 B) 3.0 C) 0.5 D) 1.3 ANSWER B
Date: September 19th, 2020
Aviary, Inc. is considering a five-year project that has initial after-tax outlay or after-tax cost of $170,000. The future after-tax cash inflows from its project for years 1 through 5 are $45,000 for each year. Aviary uses the net present value method and has a discount rate of 11.25%. Will Aviary accept the project? A) […]
Date: September 19th, 2020
