Use the information in Table 4.1 to determine the 2013 long term debt to equity ratio for Bacon Signs. A) $5,500/$5,420 = 1.01 B) $5,500/$9,620 = 0.57 C) $6,678/ $5,420 = 1.23 D) $6,678/$9,620 = 0.69 ANSWER B Explanation: B) LTD/Equity = $5,500/($4,200 + $5,420 ) = 0.57
Date: September 19th, 2020
Calculate the payback period (PP) for the cash flows provided in the table below. Note: The negative cash flow for year 0 is the initial investment for the project. Year Cash Flow 0 -$131,000 1 $187,000 2 $24,000 3 $10,000 A) 0.70 years B) 1 year C) 1.25 years D) 2.75 years ANSWER […]
Date: September 19th, 2020
Balance sheets and income statements connect through the retained earnings account. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The cost of debt is measured on an after-tax basis and reflects the rate that the firm would need to offer if it issued new debt today. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The following statements are all true EXCEPT: A) dividends are paid from net income. B) dividends represent a use of cash and do not have to be paid if a firm has a net loss. C) dividends are paid to a firm’s stockholders, both preferred and common stockholders, are tax-deductible to the paying company. D) […]
Date: September 19th, 2020
How do speculative risk and pure risk differ? Which is of greater concern to a corporate executive? Why? What will be an ideal response? ANSWER Pure risk is the possibility of loss. Speculative risk is the deviation or variability away from the expected outcome. Thus, a corporate executive is more concerned with speculative […]
Date: September 19th, 2020
An excess earnings accumulation tax is levied when ________. A) shareholders receive dividends which exceed a firm’s earnings B) firms do not pay dividends in order to delay the owners’ tax liability C) firms do not pay dividends to reinvest in the firm D) earnings exceed accumulated dividends over the years ANSWER B
Date: September 19th, 2020
The ________ method is the most intuitive but least sophisticated capital budgeting technique presented by the author. A) net present value B) internal rate of return C) payback D) modified internal rate of return ANSWER C
Date: September 19th, 2020
Which of the following statements regarding the income statement is INCORRECT? A) The income statement shows the retained earnings and expenses at a given point in time. B) The income statement shows the flow of earnings and expenses generated by the firm between two dates. C) The last or “bottom” line of the income statement […]
Date: September 19th, 2020
If a firm has publicly traded debt then the yield to maturity is approximately the same as: A) the after-tax cost of debt. B) the before-tax cost of debt. C) the 10-year Treasury bond rate. D) the WACC. ANSWER B
Date: September 19th, 2020
