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
Date: September 19th, 2020
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
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
A supplier to your firm offers credit terms of 2/15 net 45 however, your firm never takes advantage of the discount but instead always pays full price on day 45. Your finance intern claims that your firm would be better off borrowing money from an existing but little used line of credit at a current […]
Date: September 19th, 2020
What is the combined debt and equity income (interest plus earnings after tax) for the Equity and Debt firm? A) $700,000 B) $760,000 C) $560,000 D) $300,000 ANSWER B Explanation: B) = EAT + Interest = $560,000 + $200,000 = $760,000.
Date: September 19th, 2020
What is a callable bond, who “calls” a bond, and under what circumstances? What will be an ideal response? ANSWER Callable bonds have the added feature that at contractually specified times and prices the issuer can repurchase or “call” the bonds away from the owners. In effect, a callable bond is the combination […]
Date: September 19th, 2020
In a line of credit arrangement, a firm pays interest on ________. A) the full line of credit B) the total line of credit C) only the amount actually borrowed D) only the amount actually borrowed and commitment fees on any unused portion of the loan ANSWER C
Date: September 19th, 2020
