The ________ is the rate of return required by the market suppliers of capital in order to attract their funds to the firm. A) yield to maturity B) internal rate of return C) cost of capital D) modified internal rate of return ANSWER C
Date: September 19th, 2020
Inflation can distort ________. A) book value of inventory costs B) market value of revenue C) market value of sales D) book value of revenue ANSWER A
Date: September 19th, 2020
To carry out systematic retirement of bonds, a corporation makes semiannual or annual payments that are used to retire bonds by purchasing them in the marketplace. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The cost of capital reflects the cost of funds ________. A) that makes the net present value of a project equal zero B) at a given point in time C) over a long-run time period D) at current book values ANSWER C
Date: September 19th, 2020
Without adjustment, inflation may tend to cause ________ firms to appear more efficient and profitable than ________ firms. A) larger; smaller B) older; newer C) smaller; larger D) newer; older ANSWER B
Date: September 19th, 2020
Subordination means that subsequent creditors agree to wait until all claims of the senior debt are satisfied. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following groups of ratios primarily measure risk? A) liquidity, activity, and profitability B) liquidity, profitability, and market C) liquidity, activity, and debt D) activity, debt, and profitability ANSWER C
Date: September 19th, 2020
The cost of capital is the rate of return a firm must earn on investments in order to increase the firm’s value. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Restrictive covenants, coupled with standard debt provisions, help the lender to monitor the borrower’s activities to ensure efficient use of funds. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The cost of capital is used to decide whether a proposed corporate investment will increase or decrease a firm’s stock price. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
