In capital budgeting, the appropriate decision rule for an average-risk project is to accept if the ________ is greater than the WACC. A) NPV B) IRR C) cost of equity D) cost of debt ANSWER Answer: B
Date: September 19th, 2020
Which of the following would NOT be considered a cost of debt financing? A) The required return on a bank loan B) The required return on preferred stock C) The yield-to-maturity of a bond issue D) The required return on money borrowed from a venture capitalist ANSWER Answer: B
Date: September 19th, 2020
________ is the risk of being unable to cover operating costs of a firm. A) Systematic risk B) Business risk C) Financial risk D) Diversifiable risk ANSWER B
Date: September 19th, 2020
When a portion of a firm’s fixed assets are financed with current liabilities, ________. A) the firm will have positive net working capital B) the net working capital will decrease C) the current ratio will increase D) the firm will have negative net working capital ANSWER B
Date: September 19th, 2020
Which of the following factors most likely explains the difference in the profitabilities of these two firms? a. differential ability to secure debt financing b. differential economies of scale c. the difference in the number of business segments ANSWER B
Date: September 19th, 2020
Your firm has just issued a 20-year $1,000.00 par value, 10% annual coupon bond for a net price of $964.00. What is the yield to maturity? Use a financial calculator to determine your answer. A) 10.60% B) 11.10% C) 10.44% D) 10.16% ANSWER Answer: C Explanation: C) Mode = P/Y = 1; C/Y […]
Date: September 19th, 2020
Your firm has just issued a 20-year $1,000.00 par value, 6% coupon semiannual bond for a net price of $964.00. What is the yield to maturity? Use a financial calculator to determine your answer. A) 3.16% B) 7.33% C) 6.32% D) 6.00% ANSWER Answer: C Explanation: C) Mode = P/Y = 2; C/Y […]
Date: September 19th, 2020
The choice of the borrowing proportion makes up the capital budgeting of the firm. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: The choice of the borrowing proportion makes up the capital structure of the firm.
Date: September 19th, 2020
Your firm has issued a 10-year $1,000.00 par value semiannual 10% coupon bond that sells for $1,000 in the market place. The proceeds from the sale of the bond issue are $975.00 per bond. What is your firm’s yield to maturity on this new bond issue? Use a financial calculator to determine your answer. A) […]
Date: September 19th, 2020
When a company borrows from a bank or sells bonds, it is called equity financing. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: When a company borrows from a bank or sells bonds, it is called debt financing.
Date: September 19th, 2020
