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
If capital projects are ________ the NPV and IRR methods should result in ________ “accept” or “reject” decisions. If the projects are ________ this may no longer be the case. A) independent, inconsistent, mutually exclusive B) independent, consistent, mutually exclusive C) mutually exclusive, consistent, independent D) None of the above are true statements. […]
Date: September 19th, 2020
For a project to be accepted, the ________ may be greater than or less than the firm’s WACC, but the ________ must be greater than the hurdle rate. A) IRR; NPV B) hurdle rate; IRR C) MIRR; NPV D) NPV; IRR ANSWER B
Date: September 19th, 2020
A firm has a net income (after-tax profit) of $500,000 and pays dividends of $150,000. Which of the following statements is TRUE? A) Cash decreased by $150,000 B) Retained earnings increased by $350,000 C) Long-term debt increased by $350,000 D) All of the statements are true. ANSWER B
Date: September 19th, 2020
Cedar Computer Systems Inc has two projects under consideration and a WACC of 10%. Project Alpha has a hurdle rate of 12% while project Beta has a hurdle rate of 8%. If project Alpha has an expected return of 11% and project Beta has an expected return of 11%, which project(s), if any, should the […]
Date: September 19th, 2020
Within a firm, the WACC is the most appropriate required rate of return for all projects. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The major attraction of a line of credit from the bank’s point of view is that it eliminates the need to examine the creditworthiness of a customer each time it borrows money within the year. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Calculate the profitability index for the cash flows provided in the table below. Note: The negative cash flow for year 0 is the initial investment for the project. Assume a required rate of return of 9.00% Year Cash Flow 0 -$90,000 1 $32,000 2 $32,000 3 $32,000 A) 0.85 B) 0.90 C) 1.00 D) 1.11 […]
Date: September 19th, 2020
Operating leverage is concerned with the relationship between a firm’s sales revenue and its financial expenses. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
How is the profitability index calculated? A) The present value of the net cash flows minus the initial investment. B) The present value of the net cash flows /plus the initial investment. C) The present value of the net cash flows divided by the initial investment. D) The initial investment divided by the present value […]
Date: September 19th, 2020
