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
Which of the following would be classified as debt lenders for a firm? A) Preferred shareholders, banks, and nonbank lenders B) Nonbank lenders, common shareholders, and commercial banks C) Preferred shareholders, common shareholders, and suppliers D) Suppliers, nonbank lenders, and commercial banks ANSWER Answer: D Explanation: D) Preferred stockholders are hybrid equity lenders, […]
Date: September 19th, 2020
Empirical evidence indicates that the market equity value of a multiple-segment firm generally is (i) than the sum of the imputed market values of its individual segments, a phenomenon called the (ii). (i) __(ii)__ a. lower diversification discount. b. lower segment effect. c. higher diversification premium. d. higher segment effect. ANSWER A
Date: September 19th, 2020
