Modigliani and Miller (M&M) Proposition II states: A) the cost of equity does not change when a firm takes on a greater proportion of debt. B) the cost of equity increases when a firm takes on a greater proportion of debt. C) the cost of debt increases when a firm takes on a greater proportion […]
Date: September 19th, 2020
Operating-change restrictions gives the bank a right to revoke the line of credit if any major changes occur in a firm’s financial condition or operations. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Capital market conditions affect the timing of a new equity issue. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The breakeven point in dollars can be computed by dividing the contribution margin into the variable operating costs. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Although more expensive than a line of credit, a revolving credit agreement can be less risky from the borrower’s viewpoint. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The brew master at Appalachian Ale has asked you to help choose between two alternatives for a plant expansion. The first choice is a new brew system that costs $180,000 with annual maintenance costs of $17,000, an expected life of 15 years and a required rate of return of 12%. the alternative brew system costs […]
Date: September 19th, 2020
The shape of the yield curve is important for which of the following reasons? A) It provides an indication of the anticipated change in interest rates. B) It provides an indication of the borrowing costs for corporation. C) It provides clues about the economy’s current position in the business cycle. D) All of the above. […]
Date: September 19th, 2020
Earnings before interest and taxes are positive above the operating breakeven point, and a loss occurs below it. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
According to a recent study, CFOs estimated they were able to add about THIRTY percent of the overall value of the firm through financial management. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which of the following trade credit terms for goods and services purchased would be least desireable to the purchasing firm? A) 2/10 net 30 B) 1/10 net 30 C) 3/15 net 30 D) Unless we know the firm’s cost of borrowing we cannot determine which set of terms is least preferred. ANSWER B
Date: September 19th, 2020
