In capital budgeting, the ________ is the appropriate discount rate to use when calculating the NPV of an average risk project. A) WACC B) IRR C) cost of debt D) cost of Equity ANSWER Answer: A
Date: September 19th, 2020
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
As debt is substituted for equity in the capital structure and the debt ratio increases, the behavior of the overall cost of capital is partially explained by ________. A) the tax-deductibility of interest payments B) the increase in the number of common shares outstanding C) the reduction in risk as perceived by the common shareholders […]
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
