A sunk cost is a cash flow that could be realized from the best alternative use of an owned asset. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
If a new asset is being considered as a replacement for an old asset, the relevant cash flows would be found by adding the operating cash flows from the old asset to the operating cash flows from the new asset. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The constant-growth model uses the market price as a reflection of the expected risk-return preference of investors in the market place. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A firm has issued preferred stock at its $125 per share par value. The stock will pay a $15 annual dividend. The cost of issuing and selling the stock was $4 per share. The cost of the preferred stock is ________. A) 7.2 percent B) 12 percent C) 12.4 percent D) 15 percent […]
Date: September 19th, 2020
Higher the value of the times interest earned ratio, higher is the proportion of the firm’s interest income compared to its contractual interest payments. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
An A rated bond should provide investors with a higher yield than an otherwise identical B rated bond. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Sunk costs are cash outlays that have already been made and therefore have no effect on the cash flows relevant to the current decision. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
________ is a term used to describe the magnification of risk and return introduced through the use of fixed-cost financing, such as preferred stock and debt. A) Financial leverage B) Operating leverage C) Fixed-payment coverage D) Benchmarking ANSWER A
Date: September 19th, 2020
Any Ba rated bond or lower would be considered speculative or “junk.” Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A firm has determined it can issue preferred stock at $115 per share par value. The stock will pay a $12 annual dividend. The cost of issuing and selling the stock is $3 per share. The cost of the preferred stock is ________. A) 6.4 percent. B) 10.4 percent. C) 10.7 percent. D) 12 percent. […]
Date: September 19th, 2020
