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 […]
________ leverage is concerned with the relationship between sales revenue and earnings per share. A) Financial B) Operating C) Variable D) Total ANSWER D
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
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 […]
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
Which category of liabilities & equities had the smallest proportion in every year from 1980- 2000? a. current liabilities b. debt c. other non-current liabilities d. common stock e. preferred stock ANSWER E
Acme, Inc. is considering a four-year project that has an initial outlay or cost of $80,000. The respective future cash inflows for years 1, 2, 3 and 4 are: $40,000, $40,000, $30,000 and $30,000. Acme uses the discounted payback period method and has a discount rate of 12%. Will Acme accept the project if it’s […]
Factoring accounts receivable is relatively an expensive source of unsecured short-term funds. Indicate whether the statement is true or false ANSWER FALSE
The initial outlay or cost is $1,000,000 for a four-year project. The respective future cash inflows for years 1, 2, 3 and 4 are: $500,000, $300,000, $300,000 and $300,000. What is the payback period without discounting cash flows? A) About 2.50 years B) About 2.67 years C) About 3.67 years D) About 4.50 years […]
Fixed financial charges include ________. A) common stock dividends and bond interest expense B) common stock dividends and preferred stock dividends C) bond interest expense and preferred stock dividends D) stock repurchase expense ANSWER C
