Consider the following ten-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows each year for years 1 through 10 are $200,000 per year. What is the payback period without discounting cash flows? A) 10 years B) 5 years C) 2.5 years D) 0.5 years ANSWER Answer: […]
Date: September 19th, 2020
The degree of financial leverage is the ratio of ________ to percentage change in EBIT. A) operating profit B) percentage change in sales C) percentage change in EPS D) long-term debt ANSWER C
Date: September 19th, 2020
Pledges of accounts receivable are never made on a notification basis because the lender does not trust the borrower to collect the pledged account receivable and remit these payments as they are received. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Nonrecourse basis is the basis on which accounts receivable once sold to a factor, the factor accepts all the credit risks on the purchased accounts. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
For public U.S. nonfinancial firms in composite, the fractions of current assets and non-current assets (all in book values; year-end 2000) are approximately: Current Non-current Assets Assets a. 1/3 2/3 b. 1/2 1/2 c. 2/3 1/3 ANSWER A
Date: September 19th, 2020
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
Date: September 19th, 2020
Higher financial leverage causes ________ to increase more for a given increase in ________. A) EBIT; sales B) EPS; sales C) EPS; EBIT D) EBIT; EPS ANSWER C
Date: September 19th, 2020
The percentage advanced by a lender constitutes the principal of a secured loan and varies according to the type and liquidity of the collateral. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
For public U.S. nonfinancial firms in composite, the fractions of liabilities (current plus non- current), and equities (all in book values, year-end 2000) are approximately: Liabilities Equities a. 1/3 2/3 b. 1/2 1/2 c. 2/3 1/3 ANSWER C
Date: September 19th, 2020
________ is the potential use of fixed costs to magnify the effect of changes in sales on the firm’s earnings per share. A) Investing leverage B) Total leverage C) Operating leverage D) Financial leverage ANSWER B
Date: September 19th, 2020
