Durosteel Shafts Inc supplies cam shafts to GM for their popular Chevy Malibu model. Automobile sales fell significantly during the recent financial crisis. Now, at the end of Year 1, GDP is growing again and GM is forecasting an increase in automobile sales of 11% over the coming year. Use the data in the table […]
Date: September 19th, 2020
Which one of the following are the main participants in the global currency markets? A) commercial banks B) insurance companies C) hedge funds D) private equity funds ANSWER Answer: A
Date: September 19th, 2020
Cadbury plc is a global confectionery company. Cadbury is forecasting its financial statements for Year 5. Selected financial information for Year 4 is provided in the table. What is the long term debt, the plug variable, amount for the forecasted year? To forecast accounts payable use the percentage of sales method based on Year 4 […]
Date: September 19th, 2020
Capital structure may be defined as A) a collection of securities assembled by an investor. B) a schedule of projects that have positive NPVs. C) the use of bank loans by a firm. D) the mix of debt and equity. E) another term for the investment opportunities’ schedule. ANSWER D
Date: September 19th, 2020
The degree of operating leverage varies with the level of A) fixed assets. B) total debt. C) accumulated depreciation. D) total equity. E) monopoly power. ANSWER A
Date: September 19th, 2020
Dr. Magneto is evaluating whether to open a private MRI clinic in leased office space in a local strip mall. The clinic will run for two years and then close. Before the clinic opens, the offices require $200,000 of renovations. Dr. Magneto will buy $20,000 of computer equipment and one MRI machine. The MRI machine […]
Date: September 19th, 2020
Which of the following is the best way to prevent an agency problem between shareholders and managers? A) Maintain a proportional relationship between a manager’s bonus and the number of employees in the firm. B) Compensate managers to a significant degree with shares of stock in their firm. C) Reward managers if they keep costs […]
Date: September 19th, 2020
When someone in the currency market can buy a currency at a low price and sell it for a higher price, it is known as ________. A) arbitrage B) the bid-ask spread C) hedging D) interbank currency market ANSWER Answer: A
Date: September 19th, 2020
What currency currently serves as the world’s primary vehicle currency? A) Japanese yen B) British pound C) U.S. Dollar D) European euro ANSWER Answer: C
Date: September 19th, 2020
Flimsy Construction Inc generates perpetual annual EBIT of $500. The cost of unlevered equity for Flimsy is 10%. The corporate tax rate is 35%. Flimsy has 300 shares outstanding that trade for $6.89. Flimsy has debt worth $1,512. What is the present value of financial distress costs for Flimsy? Assume that there are no other […]
Date: September 19th, 2020
