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
A 20% increase in sales causes EPS to rise from $4.00 to $6.50. Assuming the firm has no debt, what is its degree of operating leverage (DOL)? A) 1.00 B) 1.50 C) 1.57 D) 3.13 E) 2.25 ANSWER D
Date: September 19th, 2020
Which of the following statements is true? A) The presence of asymmetric information in financial markets increases the likelihood that these markets are efficient. B) Accounting profits are always more important to shareholders than cash flows. C) Managers should choose investment projects that maximize shareholder wealth. D) The study of finance only benefits students who […]
Date: September 19th, 2020
What type of firm should have the least amount of operating leverage? A) Airlines B) Ship building C) Accounting and consulting D) Auto manufacturing E) Electric utilities ANSWER C
Date: September 19th, 2020
Which of the following statements is false? A) Different firms are subject to different levels of risk. B) Debt is often the least costly form of financing for a firm. C) Firms should probably use some debt in their capital structure. D) As debt increases, the risk associated with bankruptcy and agency costs is reduced. […]
Date: September 19th, 2020
Polaris Industries is forecasting its financial statements for Year 10. Selected financial information for Year 9 is provided in the table. What is the forecasted balance of cash in Year 10? (Cash is the plug account. ) Use the percentage of sales method to calculate accounts receivable for year 10 (based on the Year 9 […]
Date: September 19th, 2020
Which of the following is an advantage of a partnership? A) No license, charter, or agreement legally required B) Joint liability for company debts C) Least regulated form of business D) Ownership is easy to transfer E) Can raise money using capital markets (debt and equity) ANSWER A
Date: September 19th, 2020
Smith Motors Inc. manufactures, distributes, and services automotive parts and engines worldwide. Smith’s income statement for the year just ending is shown below. What was Smith’s dividend per share in Year 1? Smith Motors Inc. Income Statement Year 1 ($000,000’s) Revenue $19,115 COGS 14,255 SG&A 2,245 Dep. Exp. 344 EBIT 2,271 Int. Exp. 47 Pre-Tax […]
Date: September 19th, 2020
Mechano Construction Inc generates perpetual annual EBIT of $500. The corporate tax rate is 35%. Mechano has 300 shares outstanding that trade for $6.89. Mechano has debt worth $1,512 and its debt-to-equity ratio is 0.667. The CFO of Mechano is thinking about borrowing another $100 to repurchase shares. However, the additional debt will increase the […]
Date: September 19th, 2020
