Business Finance
Practice Exam
Course Introduction
Business Finance is a foundational course that introduces students to the key principles and practices of financial management within a business context. The course covers topics such as financial statement analysis, budgeting, time value of money, capital structure, risk and return, and investment decision-making. Students learn how organizations acquire and allocate financial resources, evaluate investment opportunities, and manage financial risks. Emphasis is placed on developing analytical skills and practical knowledge necessary for effective decision-making in areas such as working capital management, financing strategies, and long-term planning. The course prepares students to understand the financial environment in which businesses operate and the tools used by financial managers to maximize value for stakeholders.
Recommended Textbook
Contemporary Financial Management 12th Edition by R. Charles Moyer
Available Study Resources on Quizplus
28 Chapters
2091 Verified Questions
2091 Flashcards
Source URL: https://quizplus.com/study-set/225
Page 2
Chapter 1: The Role and Objective of Financial Management
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/3403
Sample Questions
Q1) There are problems with using the "profit maximization" criterion. Which of the following is/are correct? I. Profit maximization has an ambiguous definition of "maximizing profits".
II) Profit maximization fails to consider risk.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
Answer: C
Q2) What is the function of the CFO?
A) Control of the accounting functions of the firm.
B) Effective communication with the investment community about the firm's performance.
C) Oversight of the financial statements.
D) Determination of effective tax reduction strategies.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Domestic and International Financial Marketplace
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/3404
Sample Questions
Q1) The Standard and Poor's 500 Stock Price Index is a ____ index.
A) price weighted
B) market value weighted
C) price average
D) none of these answers is correct
Answer: B
Q2) If the exchange rate from U.S. dollars to Swiss francs is $0.20/franc, then the exchange rate from francs to dollars is
A) 0.20 francs/dollar
B) 0.80 francs/dollar
C) 5.0 francs/dollar
D) 2.0 francs/dollar
Answer: C
Q3) The following are listed security exchanges in the United Sates:
A) New York Stock Exchange
B) Pacific Exchange
C) Cincinnati Exchange
D) All the above are listed exchanges
Answer: D
Page 4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Evaluation of Financial Performance
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/3405
Sample Questions
Q1) Your current assets consist of cash, accounts receivable, and inventory. Total current liabilities equal $200,000. The average collection period is 20 days on average daily credit sales of $2,500. The current ratio is 1.3 and the quick ratio is 0.625. What is the balance in the cash account?
A) $ 75,000
B) $ 65,000
C) $135,000
D) $ 50,000
Answer: A
Q2) When considering the quality of a firm's earnings, high quality earnings tend to be
A) cash earnings
B) earnings derived from regularly recurring transactions
C) cash earnings and earnings derived from regularly recurring transactions
D) earnings per share
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Financial Planning and Forecasting
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/3406
Sample Questions
Q1) The Financial Accounting Standard Board (FASB) requires companies to prepare their statement of cash flows using the:
A) indirect method
B) direct method
C) reconciliation method
D) none of the above
Q2) Explain the cash flow generation process:
Q3) In the percent-of-sales forecasting method, which of the following is (are) assumed to increase proportionately with sales?
A) cash
B) accounts receivable
C) accounts payable
D) all of the above
Q4) An operational plan is necessary to determine what the firm wants to be at some future point in time. What does an operational plan consist of?
Q5) In developing a firm's financial plan, the firm develops a strategic plan and an operational plan. What is the difference between a strategic plan and an operational plan?
Q6) What information does a long-term financial plan offer?
Page 6
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: The Time Value of Money
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/3407
Sample Questions
Q1) Nukin' Gnats Pest Control wants to offer a contract to its customers that would protect the property of their existing customers against termite infestation. Should termites invade a customer's home, Nukin' Gnats will pay for the repairs to the home provided the customer has maintained service with Nukin' Gnats. The corporation must develop an account with a value of $500,000. They will accumulate this account over three years, after which they will offer this new contract provision. How much must be deposited annually (rounded amount) to accumulate the needed funds if they can get 5% interest at their local bank?
A) $275,026
B) $158,604
C) $80,255
D) $97,985
Q2) You plan to lease a Saab automobile that sells for $22,657 and has no salvage value. If the monthly lease is $499, with the first of 60 payments due immediately. What is the implied annual interest rate on your lease?
A) 10%
B) 11.5%
C) 12%
D) 13.5%
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Fixed Income Securities: Characteristics and Valuation
Available Study Resources on Quizplus for this Chatper
126 Verified Questions
126 Flashcards
Source URL: https://quizplus.com/quiz/3408
Sample Questions
Q1) What is the collateral used in collateral trust bonds and who is its primary user?
Q2) Crown King zero coupon bonds were issued in 1998 at $124. These bonds will mature in 2018. What will these bonds sell for in 2008 if the required rate of return in 2008 is 9.5%?
A) $352
B) $404
C) $413
D) $163
Q3) Happy Nappy Mattress Company issued a 10-year, 16% bond in 2003 that is callable at $1,100 in 5 years. In 2008 (today) the required return on bonds of this risk was 11%. The bonds pay interest semi-annually. What would you be willing to pay for one of these bonds today if you believe the bond will be called today?
A) $1188
B) $832.25
C) $1,100
D) $1,000
Q4) Explain a sinking fund.
Q5) What is a "payment-in-kind" bond and why is it considered a "weak security"?
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Common Stock: Characteristics, Valuation, and Issuance
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/3409
Sample Questions
Q1) The market value of common stock is primarily based on
A) the firm's future earnings
B) book value
C) total assets
D) retained earnings
Q2) If the stock of Sun Computers is selling for $34 and the current dividend is $0.48, what is the implied constant growth rate of dividends to an investor who requires a 14% rate of return?
A) 12.54%
B) 12.41%
C) 14.00%
D) 15.41%
Q3) Which one of the following is not a reason a firm may decide to repurchase its own stock.
A) future corporate needs
B) financial restructuring
C) investment
D) disposition of excess warrants
Q4) What are some of the costs associated with new security offerings?
Q5) List the various rights of common stockholders.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Analysis of Risk and Return
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/3410
Sample Questions
Q1) Arbitrage pricing theory is a model that relates expected returns on securities to A) security risk and yield spreads
B) yield spreads and yield curve slope
C) anticipated economic factors
D) multiple risk factors
Q2) The primary difference between the standard deviation and the coefficient of variation as measures of risk is:
A) the coefficient of variation is easier to compute.
B) the standard deviation is a measure of relative risk whereas the coefficient of variation is a measure of absolute risk.
C) the coefficient of variation is a measure of relative risk whereas the standard deviation is a measure of absolute risk.
D) the standard deviation is rarely used in practice whereas the coefficient of variation is widely used.
Q3) Why is risk an increasing function of time?
Q4) What is an efficient portfolio?
Q5) How can standard deviation, a statistical measure of dispersion, be used in investment analysis?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Capital Budgeting and Cash Flow Analysis
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/3411
Sample Questions
Q1) Raider Productions has to decide whether to build its warehouse in Dallas or Houston. This decision falls into the class of:
A) independent projects
B) mutually exclusive projects
C) contingent projects
D) marginal projects
Q2) List the reasons that the marginal cost of capital schedule increases as more funds are sought in the capital markets.
Q3) Rupp Pumps is purchasing an extruder for $80,000. The extruder will require an expenditure of $12,000 for installation and $4,000 for training new operators. The new equipment will require an increase of $5,000 in inventory, $4,000 in accounts receivable, and $3,000 in accounts payable. What is the net investment for this project?
A) $108,000
B) $102,000
C) $ 98,000
D) $ 99,000
Q4) In classifying investment projects, there are several types of capital expenditures. List them.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Capital Budgeting: Decision Criteria and Real Option Considerations
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/3412
Sample Questions
Q1) An investment project requires a net investment of $100,000 and is expected to generate annual net cash inflows of $25,000 for 6 years. The firm's cost of capital is 12 percent. Determine the profitability index for this project.
A) 1.50
B) 1.028
C) .028
D) .972
Q2) Which of the following is not a technique to handle the capital rationing problem?
A) linear programming
B) goal programming
C) ranking projects according to payback
D) ranking projects according to profitability index
Q3) The internal rate of return method assumes that the cash flows over the life of the project are reinvested at:
A) the risk-free rate
B) the firm's cost of capital
C) the computed internal rate of return
D) the market capitalization rate
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Capital Budgeting and Risk
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/3413
Sample Questions
Q1) The ____ of a firm is a weighted average of the ____ of the individual assets in the firm.
A) systematic risk; systematic risk
B) unsystematic risk; unsystematic risk
C) total risk; total risk
D) systematic risk, total risk
Q2) List the ways that a company's decision maker can adjust for total project risk in capital budegeting.
Q3) The use of sensitivity analysis requires that
A) a model of a project's cash flows be developed
B) probability distributions of the determinants of a project's cash flows be estimated
C) the firms have access to a very large computer
D) the firm is greatly interested in the portfolio risk reduction characteristics of a project
Q4) All of the following are methods of adjusting a project for total risk EXCEPT:
A) sensitivity analysis
B) carpe diem approach
C) certainty equivalent approach
D) simulation analysis
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: The Cost of Capital
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/3414
Sample Questions
Q1) The CAPM assumes that the only risk of concern to the investor is ____, which is measured by ____.
A) Unsystematic risk, beta
B) Systematic risk, the return to the market portfolio
C) Systematic risk, beta
D) Unsystematic risk, the return to the market portfolio
Q2) The Allegheny Valley Power Company common stock has a beta of 0.80. If the current risk-free rate is 6.5% and the expected return on the stock market as a whole is 16%, determine the cost of equity capital for the firm (using the CAPM).
A) 14.1%
B) 7.6%
C) 6.5%
D) 13.0%
Q3) The historic beta of a firm is of little use as a forecast of the firm's future systematic risk characteristics when
A) the firm is growing at a rate of 7-10 percent a year
B) the firm is expanding an existing product line
C) the firm is expanding into a new product line
D) all of these answers are correct
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Capital Structure Concepts
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/3415
Sample Questions
Q1) Investors' required returns and the cost of equity capital ____ as the relative amount of debt used to finance the firm ____.
A) increase, increases B) increase, decreases C) remain constant, increases D) remain constant, decreases
Q2) As more debt is added to the capital structure of a firm, the cost of debt capital A) initially rises slowly, then falls beyond some point B) increases at a steady rate throughout the entire range C) beyond some point, becomes greater than the cost of equity D) initially rises slowly, then increases rapidly beyond some point
Q3) Holding all other things equal, as the relative amount of debt in the capital structure of the firm increases, the cost of equity capital will A) increase B) decrease
C) remain unchanged; there is no relationship between the two D) initially rise rapidly, then increase slowly beyond some point
Q4) How do signaling effects impact the firm's capital structure decision?
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Capital Structure Management in Practice
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/3416
Sample Questions
Q1) A change in EBIT is magnified into a larger change in EPS. This means that financial leverage is using ____ as its fulcrum.
A) short-term costs
B) fixed costs
C) variable costs
D) retained earnings
Q2) Onyx expects to have an EBIT of $240,000 with a standard deviation of $110,000. The distribution of operating income is approximately normal. If Onyx has interest expenses of $50,000, what is the probability that it will have an operating income that is below $0?
A) 4.27%
B) 1.46%
C) 0.02%
D) 2.4%
Q3) Financial leverage causes a firm's ____ to change at a rate greater than the change in ____.
A) EBIT; EPS
B) EPS; EBIT
C) EBIT; sales
D) sales; EBIT
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Dividend Policy
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/3417
Sample Questions
Q1) The record date in the normal dividend payment procedure is A) the same day as the declaration date
B) the same day as the ex-dividend date
C) the date when the firm makes a list from its stock transfer books of shareholders eligible to receive the dividend
D) one day prior to the payment date
Q2) Most states limit dividend policy by requiring
A) that dividends may not be paid unless the firm generates net earnings during the most recent year
B) that dividends may only be paid out of retained earnings
C) that dividends may not be paid when the firm is insolvent
D) the firm's capital to be used to pay dividends
Q3) A firm with stable earnings is usually more willing to
A) retain more earnings
B) have a higher dividend payout ratio
C) have a sinking fund agreement
D) seek aggressive growth
Q4) What is the signaling effect of dividend payments?
Q5) What are the procedures for repurchasing stock?
Q6) What are the factors that determine the dividend policy of a firm?
Page 17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Working Capital Policy and Short-term Financing
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/3418
Sample Questions
Q1) An anticipated need for short-term borrowed funds is best shown in A) an operating budget
B) a capital budget
C) a production budget
D) a cash budget
Q2) A firm's working capital position is important from an internal and external standpoint. Which of the following apply:
A) It measures a firm's risk.
B) Provisions for a minimum working capital position are often included in restrictive covenants.
C) A firm's policy often affects its ability to obtain debt.
D) A working capital position determines its level of common stock sales.
Q3) The size and nature of a firm's investment in current assets is a function of a number of different factors including all of the following except
A) how efficient the firm manages its fixed assets
B) the length of the operating cycle
C) the sales level
D) credit policies
Q4) Explain trade credit.
18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: The Management of Cash and Marketable Securities
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/3419
Sample Questions
Q1) Which of the following types of marketable securities is considered to have the lowest default risk?
A) bankers' acceptances
B) U.S. Treasury issues
C) repurchase agreements
D) commercial paper
Q2) Explain why firms would want to maintain a bank balance exceeding the compensating balance requirements.
Q3) Which of the following is/are considered an intangible banking service?
I. Lines of Credit
II. Providing consultation on such matters as economic conditions and mergers
A) I only
B) II only
C) Both I and II
D) Neither I nor II
Q4) The first step in efficient cash management is the development of a ____.
A) liquid asset balance
B) cash budget
C) proforma cash flow statement
D) compensating spreadsheet
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Management of Accounts Receivable and Inventories
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/3420
Sample Questions
Q1) How does an optimal credit extension policy impact a company's accounts receivables?
Q2) Willoughby Industries, Inc. is considering whether to discontinue offering credit to customers who are more than 10 days overdue on repaying the credit extended to them. Current annual credit sales are $10 million on credit terms of "net 30". Such a change in policy is expected to reduce sales by 10 percent, cut the firm's bad-debt losses from 5 to 3 percent, and reduce its average collection period from 72 days to 45 days. The firm's variable cost ratio is 0.70 (profit contribution ratio is 0.30) and its required pretax return (i.e. opportunity cost) on receivables investments is 25 percent. Determine the net effect of this credit tightening policy on the pretax profits of Willoughby. When converting from annual to daily data or vice versa, assume that there are 365 days per year.
A) -$ 863,014
B) $145,753
C) -$ 70,000
D) $300,000
Q3) How can a company use its credit period to affect sales and inventory?
Q4) Describe how an aging of accounts is a useful monitoring technique for accounts receivable.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Lease and Intermediate-term Financing
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/3421
Sample Questions
Q1) T. Goho (lessee) wishes to lease a $25,000 car for 5 years. First Union Bank (lessor) has agreed to finance this lease and estimated the car will have a salvage value of $10,000 at the end of the lease. If First Union expects to depreciate the car on a straight-line basis to a salvage value of $0, what monthly lease payments will T. Goho have to make, given that First Union requires a 12% annual rate of return (assume a monthly interest rate of 1%)? Assume a marginal tax rate of 40%, and payments at the beginning of each month.
A) $528
B) $495
C) $317
D) $653
Q2) All of the following are types of "true leases" EXCEPT:
A) Operating lease
B) Capital lease
C) Financial lease
D) Maturity lease
Q3) In a leveraged lease, what items secure the mortgage bonds of the lender?
Q4) Explain a leveraged lease.
Q5) What is a term loan?
Q6) What are the disadvantages of leasing?
Page 21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Financing With Derivatives
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/3422
Sample Questions
Q1) The conversion ratio of a convertible security may change when A) a cash dividend is paid
B) there is a change in the market value of the security
C) a stock dividend is paid
D) there is a rights offering
Q2) A firm that issues warrants
A) can expect to receive additional funds if the formula value of the warrant is zero at the expiration date
B) has to pay the same per share dividend to the warrant holders as it pays to its stockholders
C) cannot issue convertible securities while the warrants are outstanding
D) can expect to receive additional funds if the formula value of the warrant is positive at the expiration date
Q3) Which of the following is/are a feature of convertible securities?
I. Conversion price
II. Conversion stock
A) I only
B) II only
C) Both I and II
D) Neither I nor II
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Risk Management
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/3423
Sample Questions
Q1) Which of the following statements is/are correct about the reasons why hedging is difficult to do perfectly?
I. Available futures contract sizes may not match the hedging needs of the firm.
II. There may be a change in the relationship between the futures price and the local spot price.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
Q2) An example of hedging to control currency exchange rate risk is:
A) A wine distributor currently importing wine made from the 2010 vintage.
B) A wine distributor paying for wine today that will be delivered in three years.
C) A wine distributor that visits the vineyard where wine is made before buying the vintage.
D) A wine distributor that settles all of its bills with euros.
Q3) List some nonhedging risk management strategies.
Q4) What is marking-to-market and how is this process guaranteed?
Q5) What is a hedge?
Q6) List several reasons why a firm may choose to employ risk management techniques.
Page 23
To view all questions and flashcards with answers, click on the resource link above.
Chapter 22: International Financial Management
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/3424
Sample Questions
Q1) The ____ states that the differences in interest rates between two countries should be offset by equal, but opposite, changes in the future spot exchange rate.
A) expectations theory
B) interest rate parity
C) purchasing power parity
D) international Fisher effect
Q2) In considering purchasing power parity, the relationship is:
I. not applicable due to tariffs.
II. is applicable in spite of trade barriers.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
Q3) A parent company's foreign investment risk exposure depends on the foreign subsidiary's net ____ position.
A) cash
B) equity
C) present value
D) working capital
To view all questions and flashcards with answers, click on the resource link above.
Page 24
Chapter 23: Corporate Restructuring
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/3425
Sample Questions
Q1) There are three methods for valuing merger candidates. Briefly explain each of them.
Q2) Calculate the post-merger earnings per share if the exchange ratio is 0.4 shares of Essex for each share of Twinsburg. (Assume total post-merger earnings are $43,740,000).
A) $8.10
B) $7.33
C) $7.29
D) $7.42
Q3) The ____ is the number of acquiring company shares received per share of acquiring company stock owned.
A) stock equity ratio
B) exchange ratio
C) dividend exchange ratio
D) interest parity ratio
Q4) What are some informal alternatives for salvaging a failing business?
Q5) Explain a form of business combination called a holding company and how the combination is achieved.
Q6) A new takeover defense is boardmail. How does it work?
Q7) How does a joint venture differ from a holding company?
To view all questions and flashcards with answers, click on the resource link above. Page 25
Chapter 24: Continuous Compounding and Discounting
Available Study Resources on Quizplus for this Chatper
28 Verified Questions
28 Flashcards
Source URL: https://quizplus.com/quiz/3402
Sample Questions
Q1) Moneybag Bank & Trust is offering loans at 5% compounded continuously. Before you decide to borrow using that interest rate, what payment would be required on a $200,000 loan for a 30 year loan?
A) $1,089.59
B) $1,578.34
C) $1,183.92
D) $1,226.90
Q2) With continuous compounding, why is the effective rate higher than the nominal rate?
Q3) What is the future value of $20,000 invested for 20 years at a nominal interest rate of 9 percent compounded continuously?
A) $112,088
B) $120,993
C) $108,894
D) $147,781
To view all questions and flashcards with answers, click on the resource link above.
Chapter 25: Mutually Exclusive Investments Having Unequal Lives
Available Study Resources on Quizplus for this Chatper
21 Verified Questions
21 Flashcards
Source URL: https://quizplus.com/quiz/3401
Sample Questions
Q1) Marvec needs to replace an extruder and two replacements look good. Extruder A costs $102,000 and has a 10 year life. Extruder B costs only $56,000 but its expected life is 6 years. Extruder A will generate net cash flows of $17,600 per year for 10 years and B will generate net cash flows of $13,800 per year for 6 years. If Marvec's cost of capital is 11%, which extruder should be chosen and what is its NPV? Use equivalent annual annuities.
A) B, $564
B) B, $2,388
C) A, $1,646
D) A, $280
Q2) When two or more mutually exclusive alternative investments have ____, neither the net present value nor the internal rate of return method yields reliable accept-reject information unless the projects are evaluated for an equal period of time.
A) unequal lives
B) unequal net cash flows
C) unequal net investments
D) a and b
Q3) How does the equivalent annual annuity approach solve the time discrepancy problem?
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 26: Breakeven Analysis
Available Study Resources on Quizplus for this Chatper
23 Verified Questions
23 Flashcards
Source URL: https://quizplus.com/quiz/3400
Sample Questions
Q1) The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips and a tracking chart. The finished product sells for $35 with a variable cost per unit of $21. The company has operating costs of $1,050,000. The company has operating costs of $1,050,000. What is the firm's breakeven point in dollars?
A) $1,750,000
B) $4,670,000
C) $2,625,000
D) $3,875,566
Q2) The Foggy Futures Weather Network offers an annual almanac for sale each year with information about predicted weather patterns, severe storm safety tips and a tracking chart. The finished product sells for $35 with a variable cost per unit of $21. The company has operating costs of $1,050,000. What is the firm's breakeven point in units?
A) 75,000
B) 50,000
C) 80,000
D) 65,000
Q3) List the limitations of breakeven analysis:
To view all questions and flashcards with answers, click on the resource link above. Page 28
Chapter 27: Bond Refunding Analysis
Available Study Resources on Quizplus for this Chatper
19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/3399
Sample Questions
Q1) In bond refunding analysis the ____ is believed to be the most appropriate discount rate.
A) after-tax cost of new debt
B) firm's marginal cost of capital
C) weighted average cost of capital
D) both b and c
Q2) Demetres is refunding an outstanding $75 million, 9.35% debenture with a $75 million 7.80% debenture. Both issues will be outstanding for a 3-week period. If Demetres' marginal tax rate is 40%, what is the overlapping interest?
A) $337,500
B) $242,740
C) $404,567
D) $202,500
Q3) When a bond is called, the old issue is retired and the bondholder receives:
A) new, lower interest rate bonds
B) new corporate stock
C) a cash payoff
D) treasury stock
Q4) Why is the after-tax cost of debt used in bond refunding analysis?
Q5) Why would a corporation consider bond refunding?
Page 29
To view all questions and flashcards with answers, click on the resource link above.
Chapter 28: Taxes
Available Study Resources on Quizplus for this Chatper
19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/3398
Sample Questions
Q1) The marginal tax rate for a firm with taxable income of $105,000 is
A) 30%
B) 39%
C) 15%
D) 34%
Q2) From a tax standpoint, the advantage of an S corporation is that
A) it avoids the double taxation of dividends
B) additional depreciation is allowed
C) it reduces dividend income
D) interest income is not taxed
Q3) Capital losses are
A) taxed at the same marginal rate as ordinary income
B) taxed at the 20% rate
C) deductible only against capital gains
D) used to reduce interest payments
Q4) Explain the difference between average tax rate and marginal tax rate.
Q5) How does a tax loss affect a corporation as it applies to past and future income?
Q6) How are dividends received by a corporation treated for tax purposes?
To view all questions and flashcards with answers, click on the resource link above. Page 30