From a firm’s perspective, preferred shares are at least as desirable as bonds because the firm is able to deduct preferred dividend payments for tax purposes like it can bond interest expenses. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
________ is the process whereby the firm sells receivables to a lender at a discount (say 2 percent) to the actual value of the receivables. Customers then repay the money they owe to the firm directly to the lender instead. A) Factoring of payables B) Loan sharking C) Bridge loaning D) Factoring of receivables […]
Date: September 19th, 2020
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
