The higher a firm’s long-term-debt-to-capital ratio is, the LESS financial risk the firm is taking on. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which of the following does NOT represent cash outflows to the firm? A) Taxes B) Interest payments C) Dividends D) Depreciation ANSWER D
Date: September 19th, 2020
Spontaneous liabilities such as accounts payable and notes payable represent a source of financing that arise from the normal course of business. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Janis Corp just issued an annual dividend of $2.50 per share. The firm anticipates the growth rate in dividends will be 3% annually for the foreseeable future. If the current price is $61 per share, what is the required rate of return for the firm’s equity? A) 7.10% B) 8.36% C) 7.22% D) 6.95% […]
Date: September 19th, 2020
A firm’s cost of capital may also be known as: A) the cost of financing. B) the internal rate of return. C) modified internal rate of return. D) the prime rate. ANSWER A
Date: September 19th, 2020
When a firm pays a stated dollar dividend and adjusts the payment as earnings increase, its dividend policy can be called ________. A) a low-regular-and-extra dividend policy B) a regular dividend policy C) a target dividend-payout ratio policy D) a constant-payout-ratio dividend policy ANSWER C
Date: September 19th, 2020
To estimate the after-tax cost of preferred stock you must: A) multiply the cost of preferred by (1 – the tax rate). B) multiply the cost of preferred by (1 + the tax rate). C) multiply the cost of preferred by (the tax rate). D) None of the above because preferred dividend payments are not […]
Date: September 19th, 2020
The cost of giving up a cash discount is the implied rate of interest paid in order to delay payment of an account payable for an additional number of days. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A firm has current after-tax earnings of $1,000,000 and has declared a cash dividend of $400,000. The firm’s dividend payout ratio is ________. A) 2.5 percent B) 2.0 percent C) 4.0 percent D) 40 percent ANSWER D
Date: September 19th, 2020
Generally speaking, a higher financial leverage ratio will result in an increase in a firms ROE and also reduce risk to shareholders. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
