________ 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
If a firm’s sale price per unit decreases, the firm’s ________. A) operating breakeven point will decrease B) operating breakeven point will increase C) variable costs per unit will decrease D) variable costs per unit will increase ANSWER B
Date: September 19th, 2020
Which of the following is NOT considered a source of short-term financing? A) a 10-year bond B) a banker’s acceptance C) a 90-day bank loan D) an issue of commercial paper ANSWER A
Date: September 19th, 2020
Which of the following statements comparing preferred stock to other financial instruments is NOT true? A) Like common shares, preferred dividends are after-tax payments for the firm. B) Like bonds, preferred shares are issued with a face value. C) Like bonds, most preferred shares have maturities of up to 30 years. D) Like common shares, […]
Date: September 19th, 2020
The prime rate of interest fluctuates with ________. A) the changing supply-and-demand relationship for long-term funds B) the changing supply-and-demand relationship for short-term funds C) the liquidity requirement in a money market D) the demand in a bond market ANSWER B
Date: September 19th, 2020
