List the five steps of the decision-making framework outlined in chapter 8 and briefly explain the process and importance of each step. What will be an ideal response? ANSWER 1. Define the decision to be made and any related issues 2. Determine the criteria to be used when evaluating alternatives 3. Generate alternatives […]
The market rewards firms that adopt a fixed or increasing level of dividends rather than a fixed dividend payout policy through higher share prices. Indicate whether the statement is true or false ANSWER TRUE
Highland Construction works primarily on new home construction but has become aware of new and potentially profitable construction activities in multi-home structures such as 20-unit apartment buildings. This type of construction would be a new activity for the firm. The President of the firm believes the firm could do a number of things related to […]
Which of the following capital budgeting techniques does NOT specifically use time value of money analysis? A) payback period B) net present value C) internal rate of return D) modified internal rate of return ANSWER A
Most individuals are NOT risk-averse. Indicate whether the statement is true or false ANSWER FALSE
________ ratios are a form of leverage-related ratios. A) Profitability B) Liquidity C) Market D) Coverage ANSWER D
Standard deviation is the practice of combining assets or investments in order to reduce risk. Indicate whether the statement is true or false ANSWER FALSE
Tangshan Mining has common stock at par of $200,000, paid-in capital in excess of par of $400,000, and retained earnings of $280,000. In states where the firm’s legal capital is defined as the par value of common stock, the firm could pay out ________ in cash dividends without impairing its capital. A) $200,000 B) $680,000 […]
The risk that can be eliminated through the practice of diversification is known as ________ risk. A) unsystematic B) systematic C) nondiversifiable D) speculative ANSWER A
The level of dividends a firm expects to pay is often directly related to how rapidly it expects to grow and expand its operations. Indicate whether the statement is true or false ANSWER TRUE
