We should expect the (weighted) average of all hurdle rates within a firm to be approximately equal to the overall WACC Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Financial leverage is concerned with the relationship between a firm’s earnings after interest and taxes and its common stock earnings per share. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
If a firm increases the amount of debt that it has this could lead to an increase in: A) financial risk. B) the cost of equity. C) both the cost of equity and the financial risk. D) None of the above. ANSWER C
Date: September 19th, 2020
All of the following are important factors in the economy EXCEPT: A) technology. B) interest rates. C) financial markets. D) credit conditions. ANSWER A
Date: September 19th, 2020
The interest rate on a line of credit is normally stated as a fixed rate-the prime rate. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The ________ method is a capital budgeting technique for evaluating projects of unequal lives. A) equivalent annual cost B) equal amortization C) straight-line annuity D) none of the above ANSWER A
Date: September 19th, 2020
Hurdle rates may change if: A) the cost of borrowing changes. B) the firm’s risk profile changes. C) the overall economic environment changes. D) All of the above. ANSWER D
Date: September 19th, 2020
Total leverage is concerned with the relationship between a firm’s sales revenue and its common stock earnings per share. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The business size-up involves: A) an external assessment of the industry. B) an external assessment of the economy. C) an internal assessment of the firm’s strengths and weaknesses. D) All of the above. ANSWER D
Date: September 19th, 2020
Self-liquidating loans are mainly invested in productive assets (i.e., fixed assets) which provide the mechanism through which the loan is repaid. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
