Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits against it. If Joe invests and the business loses the lawsuits, the most Joe can lose is: A) $10,000 if Joe is a general partner. B) $10,000 if Joe is a sole proprietor. C) $10,000 if Joe is a […]
Date: September 19th, 2020
If a firm is in a zero tax bracket, then the levered and unlevered betas will be identical no matter what the debt-equity ratio. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Under the “Rule of 78,” the interest earned by the lender is A) disproportionately pushed to the front of the loan period. B) calculated using the simple interest method. C) uniformly spread over the life of the loan. D) a miscellaneous deduction on your federal tax form. ANSWER A
Date: September 19th, 2020
Which of the following reasons is the most responsible for corporations being the most important form of business organization in the United States? A) Corporations have limited life. B) Stockholders have unlimited liability. C) Corporations are subject to less government regulation than other forms of business organizations. D) Corporations have the ability to raise larger […]
Date: September 19th, 2020
Larger firms and those with better credit ratings tend to also have less strict capital structure targets. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
What is the present value of $3,500 received 3 years from today if the prevailing interest rate is 6.10%? A) $2,732.98 B) $2,930.37 C) $3,625.14 D) $4,192.20 ANSWER B Explanation: B) PV = FV/(1+r)^n = $3,500/((1.0610 )^3 ) = $2,930.37.
Date: September 19th, 2020
During the past year the growth corporation increased its sales from $1,000,000 to $2,000,000 and its EBIT from $250,000 to $400,000. The result of this growth will be A) a higher operating profit margin and higher net income. B) a lower operating profit margin and higher net income. C) a lower operating profit margin and […]
Date: September 19th, 2020
A “normal” yield curve is A) upward sloping, then downward sloping. B) upward sloping. C) downward sloping, then upward sloping. D) downward sloping. ANSWER B
Date: September 19th, 2020
Consider the equation for present value. If you wished to increase the present value of a future amount by changing only one variable, which of the following actions should you take? A) increase the time period B) decrease the future value C) decrease the interest rate D) This statement cannot be answered with the information […]
Date: September 19th, 2020
Auto loan payments are an example of an inflexible expense. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
