In the NPV model, all cash flows are stated ________. A) in future value dollars, and the total inflow is “netted” against the outflow to see if the net amount is positive or negative B) in present value or current dollars, and the outflow is “netted” against the total inflow to see if the gross […]
Date: September 19th, 2020
A firm has EBIT of $375,000, interest expense of $75,000, preferred dividends of $6,000 and a tax rate of 40 percent. The firm’s degree of financial leverage at a base EBIT level of $375,000 is ________. A) 0.97 B) 1.29 C) 1.27 D) 1.09 ANSWER B
Date: September 19th, 2020
Throughout the period 1980-2000, the composite proportion of the TA of U.S. nonfinancial firms accounted for by net PP&E generally (i)_, and the proportion of TA financed by equity (ii) fairly steadily. (i) (ii) a. decreased increased b. increased decreased c. increased also increased d. decreased also decreased ANSWER B
Date: September 19th, 2020
A company usually establishes a short, arbitrary cutoff date for handling the initial screening of many small-dollar opportunities. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
Consider the following four-year project. The initial outlay or cost is $180,000. The respective cash inflows for years 1, 2, 3 and 4 are: $100,000, $80,000, $80,000 and $20,000. What is the discounted payback period if the discount rate is 11%? A) About 1.667 years B) About 2.000 years C) About 2.135 years D) About […]
Date: September 19th, 2020
Acme, Inc. is considering a four-year project that has initial outlay or cost of $100,000. The respective cash inflows for years 1, 2, 3 and 4 are: $50,000, $40,000, $30,000 and $20,000. Acme uses the discounted payback period method, and has a discount rate of 11.50%. Will Acme accept the project if it’s payback period […]
Date: September 19th, 2020
________ leverage is concerned with the relationship between sales revenue and earnings per share. A) Financial B) Operating C) Variable D) Total ANSWER D
Date: September 19th, 2020
The pledging cost of accounts receivable is normally 2 to 5 percent above the prime rate. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Identify and describe the shortcomings of the payback period model or method (without discounting). What will be an ideal response? ANSWER Answer: The payback period method ignores cash inflows after the initial outflow has been recovered. Thus, this method is biased toward those projects that have higher cash inflows in earlier years and […]
Date: September 19th, 2020
What average annual proportion of the total number of public U.S. nonfinancial firms at year-end 1980 exited over the years 1981-2000 (i.e., the average attrition rate)? a. 5.9% b. 15.9% c. 25.9% d. 35.9% ANSWER A
Date: September 19th, 2020
