The ________ method provides the number of years required for a project to repay its initial investment. A) modified internal rate of return B) internal rate of return C) net present value D) payback ANSWER D
Date: September 19th, 2020
Which of the following is considered in designing a dividend policy that is favorable to wealthy owners? A) the tax status of the firm’s owners B) the political risk of the firm C) the liability of the firm’s owners D) the reinvestment risk of the firm ANSWER A
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
Which of the following is NOT a strength of the payback method of capital budgeting? A) The payback values are relatively simple to calculate. B) When comparing projects the payback method decision is intuitive. C) The payback method uses all project cash flows in establishing the project payback period. D) It is a quick measure […]
Date: September 19th, 2020
The firm’s revenues and expenses over a period of time are reported on the firm’s: A) income statement or statement of financial position. B) income statement or statement of financial performance. C) balance sheet or statement of financial performance. D) balance sheet or statement of financial position. ANSWER B
Date: September 19th, 2020
