The revenue is $25,000, the cost of goods sold is $11,000, other expenses (from selling and administration) are $7,000, and depreciation is $1,000. What is the EBIT? A) $13,000 B) $7,000 C) $6,000 D) Cannot tell because we do not know the interest paid. ANSWER Answer: C Explanation: C) EBIT = Revenue – […]
Date: September 19th, 2020
The two most fundamental aspects of a corporation (as a form of business organization) that lead to not only tremendous economies of scale and scope (as a positive) but also are linked to the financing problems that we address in the course (as a negative) are: a. the separation of ownership and control AND private […]
Date: September 19th, 2020
The EBIT is $20,000, depreciation is $5,000, and taxes are $3,000. What is the operating cash flow (OCF)? A) $25,000 B) $22,000 C) $14,000 D) $28,000 ANSWER Answer: B Explanation: B) OCF = EBIT + Depreciation – Taxes = $20,000 + $5,000 – $3,000 = $22,000.
Date: September 19th, 2020
The ________ method is simple and fast but economically unsound as it ignores all cash flow after the cutoff date and ignores the time-value of money. A) Payback Period B) MIRR C) Net Present Value D) IRR ANSWER Answer: A
Date: September 19th, 2020
The ________ is/are critical to business decisions, business growth, and ultimately business success. A) risk and timing but not the amount of cash flow B) currency denomination of profits C) risk and profits but not the amount of cash flow D) timing and amount of cash flow ANSWER Answer: D
Date: September 19th, 2020
Information asymmetry is chief among violations of which of the assumptions of an ideal capital market? a. Capital Markets are frictionless b. Homogeneous expectations c. Atomistic competition d. The firm has a fixed investment program e. Once chosen, the firm’s financing is fixed ANSWER B
Date: September 19th, 2020
The ________ method is economically sound and properly ranks projects across various sizes, time horizons, and levels of risk, without exception for all independent projects. A) NPV B) Discounted Payback Period C) Profitability Index D) Modified IRR ANSWER Answer: A
Date: September 19th, 2020
Business risk is the risk to a firm of being unable to cover operating costs. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The ________ model provides a single measure (return) but must apply risk outside the model, thus allowing for errors in rankings of projects. A) Payback Period B) IRR C) Net Present Value D) Profitability Index ANSWER Answer: B
Date: September 19th, 2020
________ corrects for most, but not all, of the problems of IRR and gives the solution in terms of a return. A) Profitability Index B) Discounted Payback Period C) Net Present Value D) MIRR ANSWER Answer: D
Date: September 19th, 2020
