The time value of money implies that one dollar today is worth more than one dollar tomorrow, due primarily to the opportunity cost of foregoing consumption today Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
When deciding how much to save for your retirement years the author suggests you A) save as much as you possibly can because the future is highly uncertain. B) first take care of your present needs, because the future has a way of taking care of itself. C) consult a professional planner to find out […]
Date: September 19th, 2020
At 6 percent compounded monthly, how long will it take to triple your money? A) 221 months B) 102 months C) 175 months D) 48 months ANSWER A
Date: September 19th, 2020
Which of the following descriptions of the component costs of capital is INCORRECT? A) The cost of preferred shares, Kp, is estimated as the current dividend yield on any existing preferred shares or shares of similar firms. B) The cost of debt, Kd, is estimated as the after-tax cost of issuing new debt (such as […]
Date: September 19th, 2020
Discuss five limitations to ratio analysis. What will be an ideal response? ANSWER There are six limitations discussed in the text: 1. Industry identification is difficult. 2. Industry averages are only approximations. 3. Accounting practices differ widely among firms. 4. Financial ratios can be too high or too low (e.g. current ratio). 5. […]
Date: September 19th, 2020
Given a discount rate of 0%, which of the following has the greatest present value? ONE, a series of 10 equal annual end-of-the cash flows of $100 each, TWO, just like ONE except the first 5 cash flows are only $50 but the last 5 cash flows are $150 , or THREE, just like ONE […]
Date: September 19th, 2020
The appropriate measure for risk according to the capital asset pricing model is A) the standard deviation of a firm’s stock returns. B) the standard deviation of a firm’s cash flows. C) alpha. D) beta. ANSWER D
Date: September 19th, 2020
If you invest $750 every six months at 8 percent compounded semiannually, how much would you accumulate at the end of 10 years? A) $21,731 B) $22,334 C) $10,065 D) $10,193 ANSWER B
Date: September 19th, 2020
Saving for retirement is different from most other forms of saving, A) because it need not be placed in diversified investments. B) because of the special tax status accorded such savings. C) because such savings can be placed in more liquid investments. D) because such savings can be placed in more liquid investments and because […]
Date: September 19th, 2020
How could an analyst determine whether a company’s ratio is good or bad? What will be an ideal response? ANSWER Two common benchmarks provide comparisons for determining whether a ratio is good or bad, relatively speaking. They are: 1. Comparing a firm’s ratios against its own ratios over time. This provides a means […]
Date: September 19th, 2020
