The interest tax shield is equal to: A) $0 B) (EBIT – I ) * (1-the tax rate). C) (equity + debt) * (1-the tax rate) D) the tax rate multiplied by the amount of interest. ANSWER D
All of these social factors can give managers further insights into the opportunities and risks facing a particular industry EXCEPT: A) aging of the population. B) new technology developments. C) greater health consciousness. D) obesity concerns. ANSWER B
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
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
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, […]
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
In the Modigliani and Miller world where we now assume that taxes exist, and that interest payments are tax deductible for firms, then which of the following statements is TRUE? A) VL = VU – Dt B) VU = VL + Dt C) VL = VU + Dt D) VU = VL – Dt […]
An analysis of the industry’s technological improvements can help managers better identify which of these trends are occurring within a particular industry? A) Major efficiency gains. B) Reductions in overhead C) Lower production costs D) All of the above ANSWER A
________ is/are the most common form of short-term financing for a small and medium sized firms. A) Commercial paper B) Banker’s acceptances C) Short-term bank loans, or promissory notes, D) New common stock ANSWER C
A ________ is an agreement between a commercial bank and a business that states the maximum amount of unsecured short-term borrowing the bank will make available to the firm over a given period of time, provided sufficient funds are available. A) revolving credit agreement B) line of credit C) commercial paper D) single payment note […]