Assume an M&M world with taxes where the corporate tax rate is 25%, the before tax required return on debt is 8%, the required return on the unlevered firm is 12%, and the firm is financed 20% with debt and 80% with equity. What is the required return on equity? A) 12.75% B) 15.00% C) […]
Date: September 19th, 2020
The ________ is, in theory, the interest rate offered to a bank’s most credit worthy customers. A) LIBOR B) prime rate C) promissory rate D) bridge rate ANSWER B
Date: September 19th, 2020
How is the typical profitability of a stage 2 firm different from a stage 1 and a stage 3 firm? What will be an ideal response? ANSWER Stage 1 represents the initial or start-up stage of firms within a particular industry. At this point, the firms tend to have very low demand and […]
Date: September 19th, 2020
The structure of competitive forces establishes the profitability of an industry. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
________ is/are a short-term, generally unsecured. corporate IOUs issued by the “most credit-worthy” firms. A) Repurchase agreements B) Commercial paper C) Negotiable CDs D) Treasury bills ANSWER B
Date: September 19th, 2020
Due to regulatory capital requirements, there tends to be a concentration of preferred shares in the ________ industry. A) airline B) railroad C) power generation D) banking ANSWER D
Date: September 19th, 2020
A major assumption of breakeven analysis and one which causes severe limitations in its use is that ________. A) fixed costs really are fixed B) total revenue is nonlinear C) revenues and operating costs are linear D) all costs are really semi-variable ANSWER C
Date: September 19th, 2020
The effective interest rate generally is ________. A) higher on a loan if interest is paid at maturity B) lower if the loan is a discount loan C) higher if the loan is a discount loan D) not affected by whether the loan is a discount loan or a loan with interest paid at maturity […]
Date: September 19th, 2020
Due primarily to concerns about financial distress, we tend to see very few firms financed with ________ or more of their capital structure as debt. A) 20% B) 35% C) 55% D) 70% ANSWER D
Date: September 19th, 2020
A firm’s operating breakeven point is the point at which ________. A) total operating costs equal total fixed costs B) total operating costs are zero C) EBIT is less than sales D) EBIT is zero ANSWER D
Date: September 19th, 2020
