XYZ Corporation borrowed $100,000 for six months from the bank. The rate is prime plus 2 percent. The prime rate was 8.5 percent at the beginning of the loan and changed to 9 percent after two months. This was the only change. How much interest must XYZ corporation pay? A) $2,476 B) $5,417 C) $18,212 […]
Date: September 19th, 2020
Your author identifies the ________ model of capital structure as one that describes the order in which firms typically raise capital. A) step B) internal-external C) queuing D) pecking-order ANSWER D
Date: September 19th, 2020
A firm has a line of credit and borrows $25,000 at 9 percent interest for 180 days or half a year. What is the effective rate of interest on this loan if the interest is paid in advance? A) 4.7 percent B) 9.4 percent C) 9.9 percent D) 10.3 percent ANSWER C
Date: September 19th, 2020
Because banker’s acceptances are typically through foreign banks they are generally considered to be of high risk. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which of the following classes of U.S. securities have NOT averaged an annual rate of return that exceeds the average annual rate of inflation? (Data from 1926 – 2011) A) small company stocks B) large company stocks C) 90-day Treasury bills D) All of these classes of securities have averaged higher average annual rates of […]
Date: September 19th, 2020
Tony’s Beach T-Shirts has fixed annual operating costs of $75,000. Tony retails his T-shirts for $14.99 each and the variable cost per T-shirt is $4.99. Based on this information, the breakeven sales level in units is ________. A) 7,500 B) 15,030 C) 5,003 D) 3,754 ANSWER A
Date: September 19th, 2020
The pecking-order model of capital structure suggests the order in which firms prefer to raise capital is: A) debt, then retained earnings, then external equity. B) retained earnings, then debt, then external equity. C) preferred stock, then debt, then external equity. D) debt, then external equity, then retained earnings. ANSWER B
Date: September 19th, 2020
We can interpret the optimal level of debt as the firm’s ________, or the highest amount the firm can borrow before the value of the firm begins to decline. A) equity capacity B) equity multiplier C) debt capacity D) interest tax shield ANSWER C
Date: September 19th, 2020
A firm has fixed operating costs of $150,000, total sales of $1,500,000, and total variable costs of $1,275,000. The firm’s operating breakeven point in dollars is ________. A) $150,000 B) $176,471 C) $1,000,000 D) $1,425,000 ANSWER D
Date: September 19th, 2020
A firm is considering whether to out source some aspects of the manufacturing of its products. Which one of the Six P’s of Operations is the firm addressing? A) Product quality B) Process C) Plant D) People ANSWER B
Date: September 19th, 2020
