IBM stock will experience greater trading activity (in terms of the number of shares traded on a given day) compared to IBM bonds. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The three major cash flow components include the initial investment, nonoperating cash flows, and terminal cash flow. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The cost of preferred stock is typically higher than the cost of long-term debt (bonds) because the cost of long-term debt (interest) is tax deductible. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The cost of preferred stock is the ratio of the preferred stock dividend to a firm’s total earnings. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
In general, the more debt a firm uses, the smaller its financial leverage. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Initial cash outflows and subsequent operating cash inflows for a project are referred to as ________. A) necessary cash flows B) relevant cash flows C) perpetual cash flows D) ordinary cash flows ANSWER B
Date: September 19th, 2020
A company’s bonds will experience more trading activity (in terms of the number of bonds traded on a given day) compared to its stock. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The lower the fixed-payment coverage ratio, the lower is the firm’s financial leverage. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Relevant cash flows for a project are best described as ________. A) incidental cash flows B) incremental cash flows C) sunk cash flows D) contingent cash flows ANSWER B
Date: September 19th, 2020
High-quality (high-rated) bonds provide lower returns than lower-quality (low-rated) bonds. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
