Corporate Finance
Exam Answer Key
Course Introduction
Corporate Finance explores the fundamental principles and practices that govern financial decision-making within corporations. The course covers topics such as capital budgeting, valuation of assets and firms, risk and return analysis, cost of capital, capital structure, dividend policy, and working capital management. Students will learn how managers raise funds, invest in value-creating projects, and optimize the financial structure of firms. By applying quantitative tools and real-world case studies, the course equips students with the analytical skills necessary to make informed financial decisions and understand the impact of finance on corporate strategy and performance.
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) Financial management draws heavily on the following related disciplines:
A) accounting
B) macroeconomics
C) microeconomics
D) all of the above
Answer: D
Q2) All of the following are advantages of the corporate form of business organization
EXCEPT:
A) unlimited life
B) unlimited liability
C) flexibility in ownership change
D) ability to raise capital
Answer: B
Q3) The most widely accepted objective of the firm is to
A) minimize risk
B) maximize profits
C) maximize shareholder wealth
D) maximize earnings per share
Answer: C
Page 3
To view all questions and flashcards with answers, click on the resource link above.
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) If the spot rate (in U.S. dollars) for Japanese Yen is 0.00703 and the 180 day forward rate is 0.00717, then the Yen is trading at a(n) ____.
A) expected gain
B) premium
C) reciprocal
D) discount
Answer: B
Q2) Financial intermediaries include
A) securities brokers
B) commercial banks
C) securities dealers
D) all of the above
Answer: B
Q3) An exchange rate quoted as $1.47 per British pound is known as a ____ quote.
A) hedge
B) direct
C) futures
D) indirect
Answer: B
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) What is the return on stockholders' equity for a firm with a net profit margin of 5.2 percent, sales of $620,000, an equity multiplier of 1.8, and total assets of $380,000?
A) 8.48%
B) 5.74%
C) 15.27%
D) 9.36%
Answer: C
Q2) If a firm wishes to retain the same return on equity when its net profit margin and total asset turnover has declined, it must
A) decrease its equity multiplier
B) increase its equity multiplier
C) increase sales and increase assets
D) reduce sales and increase assets
Answer: B
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) Getrag expects its sales to increase 20% next year from its current level of $4.7 million. Getrag has current assets of $660,000, net fixed assets of $1.5 million, and current liabilities of $462,000. All assets are expected to grow proportionately with sales. If Getrag has a net profit margin of 10%, what additional financing will be needed to support the increase in sales? Getrag does not pay dividends.
A) $339,600
B) $283,200
C) No financing needed, surplus of $224,400
D) No financing needed, surplus of $524,400
Q2) 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?
Q3) After-tax cash flow equals:
A) earnings after tax plus non-cash charges
B) net earnings plus deferred expenses
C) net earnings plus depreciation
D) earnings after tax
Q4) Why would a firm experience cash flow difficulties immediately after a good sales period?
To view all questions and flashcards with answers, click on the resource link above. Page 6
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) If a 16 year old high school student put $2,000 at the end of each year for 4 years into an IRA that earned a rate of 9%, how much would she have accumulated by age 65? Assume funds are left to accumulate for 45 years (age 20 - 65) at 9%.
A) $442,014
B) $386,616
C) $1,767,995
D) $9,146
Q2) A(n) ____ is a financial instrument that agrees to pay an equal amount of money per period into the indefinite future (i.e. forever)
A) annuity
B) annuity due
C) sinking fund
D) perpetuity
Q3) What is the net present value rule?
Q4) Explain the sinking fund problem.
Q5) What is the difference between the nominal interest rate and the effective interest rate?
Q6) Why does an annuity due have a greater future value than a regular annuity - all things being equal?
Page 7
To view all questions and flashcards with answers, click on the resource link above.
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) Extendable notes are redeemable at par at the option of the A) holder
B) company
C) trustee
D) holder and trustee
Q2) A refrigerator manufacturer, Zero King, issued a zero coupon bond with 10 years to maturity. What is the yield-to-maturity of this bond if it is sold for $352?
A) 12.2%
B) 10%
C) 11%
D) 9%
Q3) A U.S. Government bond was quoted at 95:13 "bid" and 95:15 "asked". How much would you have to pay for one of these $1,000.00 face value bonds?
A) $951.50
B) $950.13
C) $950.15
D) $954.69
Q4) List the restrictions that an indenture places on the borrower of long-term debt.
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 valuation of common stock is considerably more complicated than the valuation of bonds or preferred stocks because:
A) The returns can take two forms, i.e. annual cash payments and price appreciation
B) Common stock dividends are normally expected to grow and not remain constant
C) The returns from common stocks are generally larger and more certain than the returns from bonds and preferred stocks
D) The returns can be in annual cash payments or price appreciation, and they are normally expected to grow and not remain constant
Q2) A firm that wishes to raise additional equity capital by selling a portion of the existing owners' stock while maintaining control of the firm should consider a ____.
A) stock split
B) stock dividend
C) share repurchase
D) separate class of nonvoting stock
Q3) When Google went public the firm sold its stock in an unusual way. What was that method and how did it impact future sales of IPOs?
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) Values of the ____ can range from +1.0 to -1.0.
A) coefficient of variation
B) correlation coefficient
C) standard deviation
D) covariance
Q2) Micromatic is considering expanding into a new product area. Micromatic's current beta is 1.2 and its beta is expected to increase to 1.45 after the expansion. The long-term growth rate of the firm's earnings is expected to increase from 6.5 percent to 10 percent. Micromatic's current dividend is $1.70 per share, the current risk-free rate is 9.1 percent, and the expected market return is 12.9 percent. Should Micromatic undertake the planned expansion?
A) No, stock price decreases $10.15
B) Yes, stock price increases $15.27
C) Yes, stock price increases $0.45
D) No, stock price decreases $15.27
Q3) The business risk of a firm refers to the
A) results from using fixed-cost sources of funds
B) variability in the price of a firm's securities
C) variability in the firm's operating earnings over time
D) influence of government regulations on business earnings
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) Parker Chemicals purchased a hexene extractor 10 years ago for $120,000. It is being depreciated on a straight-line basis over 15 years to an estimated salvage value of zero. It can be sold today for $10,000. Parker is considering purchasing a new more efficient extractor that would cost $270,000 installed and would be depreciated as a 10-year MACRS asset. (The depreciation rate for year one is 10 percent for this asset.) The company's marginal tax rate is 40%. If the new extractor is purchased, annual revenues will increase by $10,000 and annual operating expenses will decrease by $10,000. What is the net cash flow in year 1?
A) $ 7,600
B) $19,600
C) $24,200
D) $600
Q2) Capital expenditure projects may be classified in all the following types except:
A) growth opportunities
B) required to meet legal requirements
C) cost reduction opportunities
D) capital rationing
Q3) Why should sunk costs not be considered when evaluating a project?
Q4) List the steps that a firm uses in the capital budgeting process:
To view all questions and flashcards with answers, click on the resource link above. Page 11
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) Indexx, a maker of disease-detection systems based on biotechnology is considering purchasing some diagnostic equipment that costs $380,000. Shipping and installation costs will be an additional $30,000. The equipment will be depreciated based on a 3-year MACRS life. Revenues from the new equipment should be $400,000 the first year and increase 15% each year over the expected 5-year economic life. Operating expenses should be $250,000 the first year and these expenses will increase 10% each year. At the end of 5 years the equipment will be obsolete and have no salvage value. Should Indexx invest in this new equipment? Assume Indexx has a cost of capital of 15% and a marginal tax rate of 40%. Use the depreciation schedule listed below:
(3 Year Depreciation Schedule: 33.33%, 44.45%, 14.81%, 7.41%)
A) Yes, NPV = $175,573
B) Yes, NPV = $161,296
C) Yes, NPV = $456,406
D) No, NPV is negative
Q2) Multiple internal rates of return can occur when there is (are):
A) large abandonment costs at the end of a project's life
B) a major shutdown and rebuilding of a facility sometime during its life
C) more than one sign change in the pattern of cash flows over a project's life.
D) all of the above are correct
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) A project has an expected NPV of $50,000 with a standard deviation of the NPV of $20,000. Assume that NPV is normally distributed. What is the probability that the project will have a net present value greater than $60,000?
A) 1915%
B) 69.15%
C) 0.13%
D) 30.85%
Q2) Determine the pure project beta of a project that has 30% debt and 70% equity. The beta for the company is 1.4 and a tax rate of 40%.
A) 1.11
B) 1.56
C) 1.83
D) 1.05
Q3) List the ways that a company's decision maker can adjust for total project risk in capital budegeting.
Q4) What are the primary advantages and disadvantages of applying simulation to capital budgeting risk analysis?
Q5) What are the weaknesses of the net present value/payback approach?
To view all questions and flashcards with answers, click on the resource link above. Page 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) Studies analyzing the historical returns earned by common stock investors have found that the returns from average risk common stock investments over the years have averaged (arithmetically) ____ percentage points ____ than the returns on Treasury bills.
A) 6 to 8, higher
B) 1 to 2, lower
C) 3 to 4, higher
D) 8 to 9, higher
Q2) Easy Slider Inc. sold a 15 year $1,000 face value bond with a 10 percent coupon rate. Interest is paid annually. After flotation costs, Easy Slider received $928 per bond. Compute the after-tax cost of debt for these bonds if the firm's marginal tax rate is 40 percent.
A) 6.0%
B) 7.2%
C) 7.8%
D) 6.6%
Q3) Sources of debt capital to small firms is limited. Generally, what are the sources of funds for the small firm?
Q4) How is the marginal cost of the various component capital sources determined?
Q5) What does the optimal capital budget maximize? How it is determined?
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) There are many factors that influence a firm's business risk. List them.
Q2) Operating leverage involves the use of
A) equity and debt in equal proportions
B) market power
C) debt
D) assets having fixed costs
Q3) The optimal capital structure is determined by several factors including all of the following except:
A) corporate capital gains
B) business risk
C) potential bankruptcy risk
D) agency costs
Q4) With financial leverage, a change in EBIT results in a change in:
A) fixed costs
B) EPS
C) financial risk
D) EBT
Q5) How do signaling effects impact the firm's capital structure decision?
Q6) What is the pecking order theory with regard to managerial preferences for financing alternatives?
Page 15
To view all questions and flashcards with answers, click on the resource link above.
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) Dagger Company has a current capital structure consisting of $60 million in long-term debt with an interest rate of 9% and $60 million in common equity (12 million shares). The firm is considering an expansion plan costing $23 million. The expansion plan can be financed with additional long-term debt at a 12% interest rate or the sale of new common stock at $8 per share. The firm's marginal tax rate is 40%. Determine the indifference level of EBIT for the two financing plans.
A) -$30.24 million
B) $18.36 million
C) $30.24 million
D) $19.68 million
Q2) The percentage change in a firm's EBIT that results in a 1% change in sales or output is known as the
A) degree of combined leverage
B) degree of financial leverage
C) degree of operating leverage
D) degree of business risk
Q3) In what way does management's willingness to assume risk impact the firm?
Q4) Why does a firm use operating and financial leverage? In what ways does it help the firm, in what ways does it hurt the firm?
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) What is the signaling effect of dividend payments?
Q2) A dividend method that many tech companies favor in order to have more tax efficiency, boost earnings per share and signal that the company has more productive uses for its cash than paying dividends is:
A) stock splits
B) reverse stock splits
C) dividend payout
D) stock buybacks
Q3) Under the Revenue Reconciliation Act of 1993, the tax-paying individual investor may prefer low dividends and higher expected capital gains because ____.
A) the top marginal rate is lower on dividend income than on capital gains
B) the taxes on capital gains can be deferred
C) capital gains are more certain than share repurchases
D) the tax on capital gains is 28%
Q4) Restrictive covenants are contained in all of the following except
A) preferred stock agreements
B) lease contracts
C) bond indentures
D) agency restrictions
To view all questions and flashcards with answers, click on the resource link above. Page 17
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) Crystal Oil has $9 million in accounts payable, $1.8 in salaries and taxes payable, and $10.4 in other current liabilities. If Crystal Oil had a cost of sales of $54 million and selling, general, and administrative expense of $18 million, what is the length of its payables deferral period?
A) 107.47 days
B) 73.02 days
C) 54.75 days
D) 45.63 days
Q2) Tefft Industries has an average inventory of $170,000, sells on terms of 2/10, net 30, and its cost of sales is $540,000. What is Tefft's inventory conversion period?
A) 85 days
B) 115 days
C) 105 days
D) cannot be determined from the data given
Q3) The operating cycle begins with the ____ and ends with the ____.
A) purchase of resources, selling of the product on credit
B) payment for purchases, liquidation of receivables
C) purchases of resources, receipt of cash
D) payment for purchases, receipt of cash
Page 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 statements concerning "zero balance" systems is (are) correct?
A) Zero balance systems help utilize disbursement float more effectively.
B) Exactly enough funds are transferred into the zero balance accounts each day to cover the checks that have cleared.
C) The function of the concentration account is to receive all deposits coming into the zero balance system.
D) all of these answers are correct
Q2) Name the three primary components (or sources) of float:
Q3) When and why is it best to use lockboxes? Explain when should alternative methods be used.
Q4) An ordinary check that does not require the signature of the person or firm on whose account it is being drawn is a:
A) cashier's check
B) preauthorized check
C) depository check
D) float
Q5) Why do firms hold liquid asset balances?
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) ____are useful in monitoring the status and composition of a firm's accounts receivable.
A) Numerical credit scoring systems
B) Aging of accounts schedules
C) Seasonal datings
D) Aging of accounts schedules and seasonal datings
Q2) What information could be used to judge the credit worthiness of a customer?
Q3) Possible sources of relevant information about a credit applicant include
A) financial statements submitted by the applicant
B) credit reporting organizations
C) U.S. Department of Commerce
D) the applicant's financial statements and credit reporting agencies
Q4) The objective of offering seasonal datings to customers is to
A) encourage customers to place their orders prior to the peak selling period
B) speed up the collection of accounts receivable
C) increase the firm's inventory storage costs
D) reduce the number of bad checks received from customers
Q5) How can a company use its credit period to affect sales and inventory?
Page 20
Q6) In trying to collect on past-due accounts, the firm may use several methods. List them.
To view all questions and flashcards with answers, click on the resource link above.
Page 21
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) Explain a leveraged lease.
Q2) Sandia, Inc. wants to acquire a $360,000 computer controlled printing press. If owned the press would be depreciated on a straight-line basis over 10 years to a book salvage value of $0. The actual cash salvage value is expected to be $25,000 at the end of 10 years. If purchased, Sandia will incur annual maintenance expenses of $3,000. These expenses would not be incurred if the press is leased. If the press is purchased, Sandia could borrow the needed funds at an annual pre-tax interest rate of 10%. The lease rate would be $48,000 per year, payable at the beginning of each year. If Sandia has an after-tax cost of capital of 12% and a marginal tax rate of 40%, what is the net advantage to leasing?
A) $60,713
B) $65,543
C) $57,173
D) $37,737
Q3) The IRS has general rules pertaining to the tax status of true leases which allow the annual lease payments to be tax deductible. What are those rules?
Q4) What are the advantages of leasing?
Q5) What is a term loan?
Q6) What are the disadvantages of leasing?
To view all questions and flashcards with answers, click on the resource link above. Page 22
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) What is the value of a CKS Food's option prior to expiration if the exercise price is $20 and the current stock price is $20?
A) greater than $0
B) $0
C) less than $0
D) can not be valued
Q2) All of the following are reasons why firms issue warrants except: A) lowers agency costs
B) increases leverage at time of issue
C) permits a company to sell common stock at a price above the price prevailing at the time of warrant issue
D) allows a firm to sell common stock in the future without incurring underwriting costs at the time of sale
Q3) The difference between the market value of a convertible bond and the higher of its conversion or straight-bond value is the
A) exercise premium
B) investment premium
C) conversion premium
D) liquidation premium
To view all questions and flashcards with answers, click on the resource link above.
Page 23
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) What options does the buyer of a futures contract have at the time the futures contract matures?
Q2) A long hedge requires ____ a futures contract
A) the creation of
B) the selling of C) the buying of D) margining
Q3) Marking to market is a procedure for _____________ contracts.
A) futures
B) forwards C) margin
D) implied
Q4) Which of the following is the most important reason for firms to use risk management techniques?
A) To make supernormal profits
B) To reduce the chance of catastrophic financial distress
C) To reduce management's liability
D) To control inventory losses
Q5) What is marking-to-market and how is this process guaranteed?
Q6) How does hedging reduce or eliminate business risks?
Page 24
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 international Fisher effect theory states that differences in interest rates between two countries will be offset by equal but opposite changes in ________________
A) the future spot rate
B) the future interest rate
C) the American dollar
D) the euro
Q2) What is the real rate of return if the risk-free rate is 3.25 percent and the expected rate of inflation is 2.75 percent?
A) 0.50%
B) 0.51%
C) 0.487%
D) 1.49%
Q3) A high rate of inflation within a country will tend to ____ the value of its currency with respect to the currencies of other countries that are experiencing lower rates of inflation.
A) increase
B) decrease
C) have no effect on D) cannot be determined because of insufficient information
To view all questions and flashcards with answers, click on the resource link above.
Page 25
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) 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
Q2) Employee Stock Ownership Plans (ESOPs) are useful instruments for financing leveraged buyouts because in an ESOP transaction
A) employees have a greater voice in the final decision
B) lenders can offer below market interest rates
C) ESOPs can be used only when employees take over management functions
D) ESOPs attract greater external equity investments
Q3) The basic methods used in combining financial accounts in a merger include all of the following except the
A) goodwill consolidation method
B) purchase method
C) pooling of interests method
D) book value method
To view all questions and flashcards with answers, click on the resource link above.
26
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) Vida has just won a jackpot that will pay her $10,000 now, $10,000 in one year, and $10,000 in 2 years. What is the present value of this jackpot at the continuously discounted rate of 9%?
A) $27,515
B) $28,345
C) $24,516
D) $27,492
Q2) Jane deposited $1000 into a saving account paying 12% interest compounded continuously. After 45 years, how much money did she have in the account?
A) $25, 759.09
B) $157,896.32
C) $221,406.42
D) $257,895.78
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. Page 27
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) How does the equivalent annual annuity approach solve the time discrepancy problem?
Q2) Quorex is evaluating two mutually exclusive projects. Project A has a net investment of $48,000 and net cash flows over a six year period of $12,500 per year. Project B also has a net investment of $48,000 but its net cash flows of $8,640 per year will occur over a 12 year period. If Quorex has a cost of capital of 14% for these projects, which project, if either, should be chosen and what is its NPV?
A) A, $862
B) A, $1,800
C) B, $2,475
D) B, $902
Q3) The importance of time discrepancies depends on several items when making capital budgeting decisions. State those items:
Q4) Under most conditions the equivalent annual annuity method will give the same decision as:
A) the net present value method
B) linear programming
C) the replacement chain method
D) the internal rate of return
Page 28
To view all questions and flashcards with answers, click on the resource link above.
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. Using 100,000 units as a base, what is the degree of operating leverage?
A) 6.2
B) 5.7
C) 7.9
D) 4.0
Q2) The Fanny Nanny Weight Monitors Corporation offers an annual diet plans for sale each year with information about nutrition, diet tips and food substitutes. The finished product sells for $60 with a variable cost per unit of $27. The company has fixed operating costs of $1,250,000. What is its breakeven point?
A) 22,187
B) 37,879
C) 56,124
D) 48,961
Q3) How can a firm have more than one breakeven output point?
Q4) List the limitations of breakeven analysis:
To view all questions and flashcards with answers, click on the resource link above. Page 29
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) If interest rates decline, a firm should consider _______________ to take advantage of the lower interest rates.
A) selling fixed assets
B) stock sales
C) bond refunding
D) investing in marketable securities
Q2) 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
Q3) Bond refunding occurs when a company redeems a callable issue and
A) sells an equity issue, thereby reducing outstanding debt
B) sells a new issue with a lower coupon rate
C) sells a preferred issue with a low dividend rate
D) none of the above is correct
Q4) What is the principal inflow and what is the principal outflow from a bond refunding situation?
Q5) Why is the after-tax cost of debt used in bond refunding analysis?
Page 30
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 Flashcards
Source URL: https://quizplus.com/quiz/3398
Sample Questions
Q1) What is the tax liability in 2010 for a corporation with taxable income of $425,000?
A) $144,500
B) $132,750
C) $150,250
D) $122,700
Q2) BET had a taxable income of $135,000 in 2010. What is its tax liability?
A) $22,500
B) $52,650
C) $35,900
D) $15,900
Q3) How does a tax loss affect a corporation as it applies to past and future income?
Q4) Explain the difference between average tax rate and marginal tax rate.
Q5) The marginal tax rate for a firm with taxable income of $105,000 is
A) 30%
B) 39%
C) 15%
D) 34%
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 31