The cost of preferred shares reflects the rate that the firm would need to offer if it issued new preferred shares today. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
If a firm anticipates stretching accounts payable, its cost of giving up a cash discount is reduced. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
For a project with ordinary cash flows (defined as negative initial cash flows followed by positive cash flows) and a positive NPV, which of the following statements is NOT necessarily true? A) The internal rate of return will be greater than the required rate of return. B) The modified internal rate of return will be […]
Date: September 19th, 2020
A grocery store chain with a high current ratio but a low quick ratio probably does not have a serious liquidity problem and would likely have little trouble selling inventory to meet the obligations of current liabilities. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The ________ is a popular and somewhat intuitive technique for estimating the required return on common equity. A) dividend model B) yield to maturity model C) future value model D) interest model ANSWER A
Date: September 19th, 2020
The problem with the regular dividend policy from a firm’s perspective is that ________. A) it regularly pays dividends which fluctuate with earnings B) if the firm’s earnings drop, the dividends may be low C) even when earnings are low, the company must pay a fixed dividend D) it increases the shareholders’ uncertainty […]
Date: September 19th, 2020
Why does the preferred stockholders’ equity section of the balance sheet change only when new shares are sold or repurchased, whereas the common stockholders’ equity section changes from year to year regardless of whether new shares are bought or sold? ANSWER Preferred stock is a fixed perpetuity. Common equity consists of the paid […]
Date: September 19th, 2020
Your firm is considering the issuance of preferred shares for the first time. The average yield on preferred stock for firms in your industry is 6.50%. If you wish to issue preferred stock at par with a face value of $50.00 per share, approximately how large would you need to make your annual preferred dividend? […]
Date: September 19th, 2020
The age of accounts receivable measures the average time between the firm’s purchase of materials (assumed to be on credit) and its payment to the suppliers of those materials. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The dividend policy must be formulated considering two basic objectives, namely ________. A) delaying the tax liability of the stockholder and information content B) maximizing shareholder wealth and maintaining liquidity C) maximizing shareholder wealth and providing for sufficient financing D) maintaining liquidity and minimizing the weighted average cost of capital ANSWER C
Date: September 19th, 2020
