As Akerlof argues, sellers who have a lemon, of course, know they have lemon but are not willing to tell the truth about the condition of their auto and, for the short selling period involved, can put their auto in a satisfactory condition that approximates the normal condition of the auto that are not lemons. […]
Date: September 19th, 2020
A firm is considering purchasing two assets. Asset L will have a useful life of 20 years and cost $5 million; it will have installation costs of $1 million but no salvage or residual value. Asset S will have a useful life of 8 years and cost $2 million; it will have installation costs of […]
Date: September 19th, 2020
Pecking order is a hierarchy of financing beginning with retained earnings, followed by debt financing, and finally external equity financing. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A field warehouse is ________. A) a warehouse outside the metropolitan area B) a warehouse on the borrower’s premises C) a central warehouse storing the merchandise of several businesses D) a warehouse located near the lender ANSWER B
Date: September 19th, 2020
Appropriate collateral for a loan secured under a trust receipt inventory loan is ________. A) drill bits B) pencils C) vehicles D) bolts ANSWER C
Date: September 19th, 2020
If four plus five equals ten, that’s synergy. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
Because of the extensive research conducted in recent years in the area of capital structure theory, it is now possible for financial managers to pinpoint with great accuracy a firm’s optimal capital structure. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Erosion is the additional cash generated by a new project beyond the current cash flow with the addition of a specific new project. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: INCREMENTAL CASH FLOW is the additional cash generated by a new project beyond the current cash flow with […]
Date: September 19th, 2020
Despite the extensive research conducted in recent years in the area of capital structure theory, it is not yet possible to provide financial managers with a specified methodology for use in determining a firm’s optimal capital structure. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Continuing with the numbers from the previous question, compute new value of the firm’s levered equity, , after the following actions by the firm’s management: Management issues additional pure-discount debt which has a promised payment of X’=621 at T=3 and has the same priority as the firm’s original debt. The firm receives total proceeds of […]
Date: September 19th, 2020
