When computing the total cash outflow needed to start a project, we must include ________. A) any change in net income B) any change in working capital C) any change in dividends D) any change in earnings ANSWER Answer: B
Date: September 19th, 2020
Compute the present value of the tax shield generated when Smith Company issues $100 mn. in perpetual debt with an 8% coupon rate, and uses the proceeds to retire equity. The corporate tax rate is 34%. a. $2.72 mn. b. $8 mn. c. $34 mn. d. 272 mn. ANSWER C
Date: September 19th, 2020
Financial institutions (such as commercial banks and finance companies) play an important role in mitigating information asymmetry problems in financial markets because: a. they require a potential borrower to disclose confidential information about their project to the public before they are approved for a loan. b. they regularly receive private information from the firm about […]
Date: September 19th, 2020
A firm’s board of directors has a variety of tools at its disposal to control management’s activities, including all of the following EXCEPT: a. Controlling the firm’s capital structure. b. Requiring board approval of major capital expenditures, acquisitions, divestitures, security offerings, etc. c. requiring board approval of all mergers and acquisitions. d. hiring outside consultants […]
Date: September 19th, 2020
If we know the ________ and the EBIT, we can estimate the taxes for a project for the year. A) MACRS percentage B) sunk costs C) tax rate D) salvage value ANSWER Answer: C
Date: September 19th, 2020
As the ratio of current assets to total assets increases, a firm’s risk increases. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The financial manager needs help in producing the best estimates of the future costs of production. Where does this help come from? Where does this help come from? A) Marketing manager B) Production manager C) Human resources manager D) All of these ANSWER Answer: D
Date: September 19th, 2020
At the end of a project’s life, we will recover any initial changes in ________ from the beginning of the project. A) working capital B) depreciation C) taxes D) start-up costs ANSWER Answer: A
Date: September 19th, 2020
To project the appropriate anticipated cash flow for a project, we must put all cash flow knowledge together. This includes ________ of the incremental cash flow. A) both the amount and timing B) the amount C) the timing D) the amount but not the timing ANSWER Answer: A
Date: September 19th, 2020
We can use the ________ to estimate a project’s operating cash flows each period. A) modified income statement format B) income statement format C) balance sheet format D) annual report format ANSWER Answer: A
Date: September 19th, 2020
