Managerial Finance
Chapter Exam Questions
Course Introduction
Managerial Finance explores the principles and practices that guide financial decision-making in organizations. The course covers topics such as financial statement analysis, planning and budgeting, capital structure, working capital management, risk assessment, and the evaluation of investment opportunities. Students will learn to apply financial concepts to real-world scenarios, enabling them to contribute to effective resource allocation, maximize firm value, and support strategic business goals. Through case studies and practical exercises, students gain insight into the role of finance managers in both short-term operations and long-term financial planning.
Recommended Textbook
Corporate Finance 3rd Edition by Jonathan Berk
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Page 2
Chapter 1: The Corporation
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Q1) Do corporate decisions that increase the value of the firm's equity benefit society as a whole?
A) Yes, as long as the value of the firm's equity increases, society is better off.
B) Yes, as long as the increase in the value of the firm's equity does not come at the expense of others.
C) No, any gain in the value of the firm's equity is always less than the cost to society.
D) No, any gains in the value of the firm's equity are perfectly offset by societal costs.
Answer: B
Q2) What strategies are available to shareholders to help ensure that managers are motivated to act in the interest of the shareholders rather than their own interest?
Answer: 1. The threat of a hostile takeover
2. Shareholder initiatives
3. Performance based compensation
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3
Chapter 2: Introduction to Financial Statement Analysis
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Q1) Luther's quick ratio for 2008 is closest to:
A) 0.77
B) 0.87
C) 1.15
D) 1.30
Answer: A
Q2) If ECE's return on assets (ROA) is 12%, then ECE's return on equity (ROE) is:
A) 10%
B) 12%
C) 18%
D) 22%
Answer: D
Q3) The DuPont Identity expresses the firm's ROE in terms of:
A) profitability, asset efficiency, and leverage.
B) valuation, leverage, and interest coverage.
C) profitability, margins, and valuation.
D) equity, assets, and liabilities.
Answer: A
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Chapter 3: Financial Decision Making and the Law of One
Price
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Q1) Consider an ETF that is made up of one share each of IBM, MRK, and C. The minimum bid price for this ETF in a normal market is closest to:
A) $162.85
B) $163.00
C) $168.00
D) $168.10
Answer: A
Q2) Assuming that the film maker issues the new security, the NPV for this project is closest to what amount? Should the film maker make the investment?
A) $1.7 million; Yes
B) $1.7 million; No
C) $2.7 million; Yes
D) $2.7 million; No
Answer: C
Q3) The price per share of the ETF in a normal market is:
Answer: Value of ETF = 2 × 121.57 + 3 × 36.59 + 3 × 3.15 = $362.36
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5
Chapter 4: The Time Value of Money
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Q1) Suppose that you deposit $10,000 in an account that pays 6% interest and you want to know how much will be in your account at the end of 10 years. To solve this problem in Microsoft Excel, you would use which of the following Excel formulas?
A) =FV(.06,10000,0,10)
B) =PV(.06,10000,0,10)
C) =FV(.06,10,0,10000)
D) =PV(.06,10,0,10000)
Q2) If the appropriate interest rate is 15%, then Nielson Motors should:
A) invest in this opportunity since the NPV is positive.
B) not invest in this opportunity since the NPV is positive.
C) invest in this opportunity since the NPV is negative.
D) not invest in this opportunity since the NPV is negative.
Q3) At an annual interest rate of 7%, the future value of $5,000 in five years is closest to:
A) $3,565
B) $6,750
C) $7,015
D) $7,035
Q4) Draw a timeline detailing Joe's cash flows from the sale of the family business.
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Chapter 5: Interest Rates
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Q1) The total amount of interest that Dagny will pay during the first month of her mortgage is closest to:
A) $1,110
B) $1,785
C) $1,800
D) $2,245
Q2) Which of the following statements is FALSE?
A) The plot of the relationship between the investment risk and the interest rate is call the yield curve.
B) Each of the last six recessions in the United States was preceded by a period with an inverted yield curve.
C) The nominal interest rate does not represent the increase in purchasing power that will result from investing
D) A risk-free cash flow received in two years should be discounted at the two-year interest rate.
Q3) What is the NPV of an investment that costs $2500 and pays $1000 certain at the end of one, three, and five years?
Q4) What is the effective after-tax rate of each instrument, expressed as an EAR?
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Chapter 6: Valuing Bonds
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Q1) The yield to maturity for the three year zero-coupon bond is closest to:
A) 5.4%
B) 5.8%
C) 5.6%
D) 6.0%
Q2) Which of the following statements is FALSE?
A) Bond traders typically quote bond prices rather than bond yields .
B) Treasury bills are zero-coupon bonds.
C) Zero-coupon bonds always trade at a discount.
D) The yield to maturity is typically stated as an annual rate by multiplying the calculated YTM by the number of coupon payment per year, thereby converting it to an APR.
Q3) Consider a bond that pays annually an 8% coupon with 20 years to maturity. The amount that the price of the bond will change if its yield to maturity increases from 5% to 7% is closest to:
A) -$270
B) -$225
C) -$310
D) -$250
Q4) Plot the zero-coupon yield curve (for the first five years).
Page 8
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Chapter 7: Investment Decision Rules
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Q1) The internal rate of return (IRR) for project A is closest to:
A) 7.7%
B) 21.6%
C) 23.3%
D) 42.9%
Q2) Assume that once her book is finished, it is expected to generate royalties of $5 million in the first year (paid at the end of the year) and these royalties are expected to decrease by 40% per year in perpetuity. Assuming that Palin's cost of capital is 10% and given these royalties payments, the NPV of Palin's book deal is closest to:
A) $3.75 million
B) $12.20 million
C) $13.00 million
D) $13.75 million
Q3) Assume that projects A and B are mutually exclusive. The correct investment decision and the best rational for that decision is to
A) invest in project A since NPV<sub>B</sub> < NPV<sub>A.</sub>
B) invest in project B since IRR<sub>B</sub> > IRR<sub>A</sub>.
C) invest in project B since NPV<sub>B</sub> > NPV<sub>A.</sub>
D) invest in project A since NPV<sub>A</sub> > 0.
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Page 9
Chapter 8: Fundamentals of Capital Budgeting
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Q1) Luther Industries has outstanding tax loss carryforwards of $70 million from losses over the past four years. If Luther earns $15 million per year in pre-tax income from now on, Luther first pays taxes in:
A) 7 years
B) 2 years
C) 4 years
D) 5 years
Q2) Which of the following statements is FALSE?
A) The simplest method used to calculate depreciation is the straight-line method.
B) A sunk cost is any unrecoverable cost for which the firm is already liable.
C) Unlevered Net Income = EBIT × <sub>c</sub>.
D) The decision to continue or abandon should be based only on the incremental costs and benefits of the project going forward.
Q3) The incremental EBIT for Shepard Industries in year two is closest to:
A) $415
B) $875
C) $595
D) $510
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Chapter 9: Valuing Stocks
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Q1) Which of the following statements is FALSE?
A) Estimating dividends, especially for the distant future, is difficult.
B) A firm can only pay out its earnings to investors or reinvest their earnings.
C) Successful young firms often have high initial earnings growth rates.
D) According to the constant dividend growth model, the value of the firm depends on the current dividend level, divided by the equity cost of capital plus the growth rate.
Q2) Which of the following statements is FALSE?
A) The most common valuation multiple is the price-earnings (P/E) ratio.
B) You should be willing to pay proportionally more for a stock with lower current earnings.
C) A firm's P/E ratio is equal to the share price divided by its earnings per share.
D) The intuition behind the use of the P/E ratio is that when you buy a stock, you are in sense buying the rights to the firm's future earnings and differences in the scale of firms' earnings are likely to persist.
Q3) If DM has $500 million of debt and 14 million shares of stock outstanding, then what is the price per share for DM Corporation?
Q4) Calculate the enterprise value for DM Corporation.
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11
Chapter 10: Capital Markets and the Pricing of Risk
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Q1) Which of the following is NOT a diversifiable risk?
A) The risk that oil prices rise, increasing production costs
B) The risk of a product liability lawsuit
C) The risk that the CEO is killed in a plane crash
D) The risk of a key employee being hired away by a competitor
Q2) The standard deviation of the overall payoff to Bank B is closest to:
A) $751,000
B) $2,179,000
C) $2,375,000
D) $21,794,000
Q3) What is the excess return for the S&P 500?
A) 5.7%
B) 7.0%
C) 0%
D) 8.4%
Q4) The beta for security "Z" is closest to:
A) -1.00
B) -0.25
C) 0.00
D) 0.25
12
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Chapter 11: Optimal Portfolio Choice and the Capital Asset Pricing Model
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Q1) Which of the following statements is FALSE?
A) When stocks are perfectly positively correlated, the set of portfolios is identified graphically by a straight line between them.
B) An investor seeking high returns and low volatility should only invest in an efficient portfolio.
C) When the correlation between securities is less than 1, the volatility of the portfolio is reduced due to diversification.
D) Efficient portfolios can be easily ranked, because investors will choose from among them those with the highest expected returns.
Q2) The beta on Paul's Portfolio is closest to:
A) 1.5
B) 1.8
C) 1.3
D) 1.0
Q3) Calculate the correlation between Stock Y's and Stock Z's returns .
Q4) Assuming that the risk-free rate is 4% and the expected return on the market is 12%, then calculate the required return on Mary's portfolio.
Q5) Calculate the covariance between Stock Y's and Stock Z's returns .
Page 13
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Chapter 12: Estimating the Cost of Capital
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Q1) Which of the following statements is FALSE?
A) A market index reports the value of a particular portfolio of securities.
B) The S&P 500 is the standard portfolio used to represent "the market" when using the CAPM in practice.
C) Even though the S&P 500 includes only 500 of the more than 7,000 individual U.S. Stocks in existence, it represents more than 70% of the U.S. stock market in terms of market capitalization.
D) The S&P 500 is an equal-weighted portfolio of 500 of the largest U.S. stocks.
Q2) The Market's excess return for 2008 is closest to:
A) -40.0%
B) -38.5%
C) -37.0%
D) -34.1%
Q3) Suppose that you have invested $30,000 invested in the market portfolio. Then the amount that you have invested in Wyatt Oil is closest to:
A) $4,500
B) $6,000
C) $7,715
D) $9,000
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Page 14
Chapter 13: Investor Behavior and Capital Market Efficiency
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Q1) Which of the following statements regarding portfolio "B" is/are correct? 1. Portfolio "B" has a positive alpha.
2) Portfolio "B" is overpriced.
3) Portfolio "B" is less risky than the market portfolio.
4) Portfolio "B" should not exist if the market portfolio is efficient.
A) 2 and 4
B) 4 only
C) 1, 3, and 4
D) 1 and 4
Q2) Which of the following statements is FALSE?
A) A significant fraction of investors might care about aspects of their portfolios other than expected return and volatility, and so would be unwilling to hold inefficient investment portfolios.
B) Although the true market portfolio of all invested wealth might be efficient, the proxy portfolio might not track the actual market very well.
C) We might be using the wrong proxy portfolio when we calculate alphas.
D) The true market portfolio consists of all traded investment wealth in the economy.
Q3) What does the existence of a positive alpha investment strategy imply?
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15
Chapter 14: Capital Structure in a Perfect Market
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Q1) Suppose that to raise the funds for the initial investment the firm borrows $40,000 at the risk free rate and issues new equity to cover the remainder. In this situation, the cost of capital for the firm's levered equity is closest to:
A) 23%
B) 25%
C) 15%
D) 18%
Q2) Following the borrowing of $12 and subsequent share repurchase, the number of shares that RC will have outstanding is closest to:
A) 4.0 million
B) 6.0 million
C) 4.9 million
D) 4.5 million
Q3) What is Luther's enterprise value?
A) $16 billion
B) $10.5 billion
C) $24 billion
D) $20 billion
Q4) What is the conservation of value principle?
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Chapter 15: Debt and Taxes
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Q1) FBNA's EBIT is closest to:
A) $43 million
B) $40 Million
C) $45 million
D) $60 million
Q2) Which of the following statements is FALSE?
A) To determine the benefit of leverage for the value of the firm, we must compute the present value of the stream of future interest tax shields the firm will receive.
B) Because the cash flows of the levered firm are equal to the sum of the cash flows from the unlevered firm plus the interest tax shield, by the Law of One Price the same must be true for the present values of these cash flows.
C) By increasing the amount paid to debt holders through interest payments, the amount of the pre-tax cash flows that must be paid as taxes increases.
D) When a firm uses debt, the interest tax shield provides a corporate tax benefit each year.
Q3) If Flagstaff currently maintains a .8 debt to equity ratio, then calculate the value of Flagstaff's interest tax shield.
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Page 17
Chapter 16: Financial Distress, Managerial Incentives, and Information
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Q1) The idea that when a seller has private information about the value of good, buyers will discount the price they are willing to pay due to adverse selection is known as the:
A) pecking order hypothesis.
B) signaling theory of debt.
C) lemons principle.
D) credibility principle.
Q2) Assume that in the event of default, 20% of the value of MI's assets will be lost in bankruptcy costs and suppose that MI has zero-coupon debt with a $125 million face value due next year. The initial value of MI's debt is closest to:
A) $110 million
B) $105 million
C) $125 million
D) $111 million
Q3) The total debt overhang associated with accepting project 1, is closest to:
A) $0 million
B) $12.5 million
C) $14.4 million
D) $22.5 million
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Chapter 17: Payout Policy
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Q1) The effective dividend tax rate in 1989 is closest to:
A) 0%
B) 20%
C) 25%
D) 30%
Q2) In 2006, Luther Incorporated paid a special dividend of $5 per share for the 100 million shares outstanding. If Luther has instead retained that cash permanently and invested it into treasury bills earning 5%, then the present value of the additional taxes paid by Luther would be closest to:
A) $35 million
B) $290 million
C) $175 million
D) $585 million
Q3) Assuming Luther issues a 5:2 stock split, then Luther's new share price is closest to:
A) $32.00
B) $16.00
C) $24.00
D) $30.00
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19
Chapter 18: Capital Budgeting and Valuation With Leverage
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Q1) Which of the following is NOT a step in valuation using the flow to equity method?
A) Determine the equity cost of capital, r<sub>E</sub>.
B) Compute the equity value, E, by discounting the free cash flow to equity using the equity cost of capital.
C) Determine the free cash flow to equity of the investment.
D) Determine the before-tax cost of capital, r<sub>U</sub>.
Q2) The NPV of this project using the APV method is closest to:
A) $10 million
B) $13 million
C) $42 million
D) $71 million
Q3) Galt's free cash flow to equity (FCFE) is closest to:
A) $19.2 million
B) $20.4 million
C) $21.2 million
D) $24.0 million
Q4) Calculate the present value of the interest tax shield provided by Omicron's new project.
Q5) Calculate the debt capacity of Omicron's new project for years 0, 1, and 2.
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Chapter 19: Valuation and Financial Modeling: a Case Study
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Q1) What range for the market value of equity for Ideko is implied by the range of EV/Sales multiples for the comparable firms if Ideko holds $6.5 million of cash in excess of its working capital needs?
Q2) Ideko's Accounts Receivable Days is closest to:
A) 84 days
B) 95 days
C) 90 days
D) 75 days
Q3) If the risk-free rate of interest is 6% and the market risk premium has historically averaged 5%, then the cost of capital for Luxottica is closest to:
A) 10.2%
B) 13.5%
C) 9.1%
D) 14.7%
Q4) What is the purpose of the sensitivity analysis?
Q5) What range for the market value of equity for Ideko is implied by the range of P/E multiples for the comparable firms?
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Chapter 20: Financial Options
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Q1) Which of the following statements is FALSE?
A) Because a short position in an option is the other side of a long position, the profits from a short position in an option are just the negative of the profits of a long position.
B) The deeper out-of-the-money the put option is, the less negative its beta, and the higher is its expected return.
C) Although payouts on a long position in an option contract are never negative, the profit from purchasing an option and holding it to expiration could well be negative because the payout at expiration might be less than the initial cost of the option.
D) The put position has a higher return in states with low stock prices; that is, if the stock has a positive beta, the put has a negative beta.
Q2) KD Industries stock is currently trading at $32 per share. Consider a put option on KD stock with a strike price of $30. The maximum value of this put option is:
A) $0
B) $32
C) $30
D) $2
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22
Chapter 21: Option Valuation
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Q1) The risk neutral probability of a down state for KD Industries is closest to:
A) 37.5%
B) 62.5%
C) 40.0%
D) 60.0%
Q2) The Black-Scholes of a one-year, at-the-money put option on Taggart stock is closest to:
A) -0.2850
B) 0.2850
C) -0.3859
D) -0.6141
Q3) Consider a one-year, at-the-money call option on Taggart stock. The effect on the price of this call option of an increase in the volatility from 25% to 40% is closest to:
A) $0.70 increase
B) $1.70 decrease
C) $2.30 increase
D) $2.80 increase
Q4) Construct a binomial tree detailing the option information and payoffs for a call option with a $20 strike price that expires in one year.
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Chapter 22: Real Options
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Q1) Which of the following statements is FALSE?
A) Abandonment options can add value to a project because a firm can drop a project if it turns out to be unsuccessful.
B) Corporate bonds often contain embedded abandonment options: The issuing firm sometimes has the option to convert the bond-that is, to repay it.
C) An abandonment option is the option to walk away.
D) An important abandonment option that most people encounter at some point in their lives is the option to abandon their mortgage.
Q2) Assuming that this project will provide Rearden with perpetual annual cash flows of $65,000, Rearden should:
A) invest today since the NPV is positive.
B) invest today since the NPV is negative.
C) invest today since the NPV using the hurdle rate is positive.
D) delay investing since the NPV using the hurdle rate is negative.
E) delay investing since the NPV using the hurdle rate is positive.
Q3) Can value be created by waiting for uncertainty to resolve?
Q4) Assuming you are able to see the plant, draw a decision tree detailing this problem.
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Chapter 23: Raising Equity Capital
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Q1) When referring to IPOs, what is book building?
Q2) Which of the following statements is FALSE?
A) Primary shares are new shares issued by the company.
B) Today, investors become informed about the impending sale of stock by the news media, via a road show, or through the book-building process, so tombstones are purely ceremonial.
C) In a cash offer, the firm offers the new shares to existing shareholders.
D) Historically, intermediaries would advertise the sale of stock (both IPOs and SEOs) by taking out advertisements in newspapers called tombstones.
Q3) The post-money valuation of your firm is closest to:
A) $12.5 million
B) $5.2 million
C) $10.0 million
D) $5.0 million
Q4) What will the proceeds from the IPO be if Luther is selling 1.1 million shares?
Q5) Based upon the price/earnings ratio, what would be a reasonable value for KD?
Q6) How much money did the venture capitalists receive?
Q7) What will the offer price of these shares be if Luther is selling 800,000 shares?
Page 25
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Chapter 24: Debt Financing
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Q1) Which of the following statements regarding the private debt market is FALSE?
A) Private debt has the advantage that it avoids the cost of registration.
B) Bank loans are an example of private debt, debt that is not publicly traded.
C) Private debt has the disadvantage of being illiquid.
D) The public debt market is larger than the private debt market.
Q2) Mortgages that do not meet certain credit criteria and have a high probability of default are know as ________ mortgages.
A) prepayment
B) pooled
C) under-water
D) subprime
Q3) What is the Yield to Call (YTC) on this bond?
Q4) What kind of corporate debt can be secured by any specified assets?
A) Mortgage bonds
B) Notes
C) Asset-backed bonds
D) Debentures
Q5) What is the Yield to Maturity (YTM) on this bond?
Q6) What is the Yield to Maturity (YTM) on this bond?
Q7) What is the Yield to Call (YTC) on this bond?
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Chapter 25: Leasing
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Q1) Which of the following statements is FALSE?
A) We can compare leasing to buying the asset using equivalent leverage by discounting the incremental cash flows of leasing versus buying using the after-tax borrowing rate.
B) A non-tax lease is attractive if it offers a better interest rate than would be available with a loan.
C) Evaluating a true tax lease is much more straightforward than evaluating a non-tax lease.
D) To determine whether a non-tax lease offers a better rate, we discount the lease payments at the firm's pre-tax borrowing rate and compare it to the purchase price of the asset.
Q2) If Luther acquires the new fleet of delivery trucks using a capital lease, Luther's Debt to Equity ratio will be closest to:
A) 0.66
B) 1.5
C) 0.80
D) 2.0
Q3) What will Luther's balance sheet look like if they acquire the new fleet of delivery trucks using a capital lease?
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Page 27
Chapter 26: Working Capital Management
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Q1) 1. The average number of inventory days outstanding for Rearden is closest to:
A) 6 days
B) 8 days
C) 37 days
D) 64 days
Q2) Which of the following money market investments is a draft written by the borrower and guaranteed by the bank on which the draft is drawn. Typically used in international trade transactions. The borrower is an importer who writes the draft in payment for goods?
A) Treasury Bill
B) Repurchase Agreement
C) Certificates of Deposit (CD)
D) Banker's Acceptance
E) Commercial Paper
Q3) The percentage of Wyatt's receivables that are current is closest to:
A) 32.1%
B) 38.3%
C) 42.2%
D) 61.7%
Q4) Describe "just-in-time" inventory management.
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Chapter 27: Short-Term Financial Planning
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Q1) Which alternative should Taggart choose?
A) Alternative #1 since it has the lowest EAR
B) Alternative #2 since it has the lowest EAR
C) Alternative #3 since it has the lowest EAR
D) Alternative #2 since it has the highest actual rate
Q2) Wyatt Oil has an issue of commercial paper with a face value of $10,000,000 and a maturity of three months. Wyatt received $9,800,000 when it sold the paper. The effect annual rate for this financing is closest to:
A) 5.6%
B) 6.6%
C) 7.2%
D) 8.4%
Q3) Luther Industries is offered a $1 million dollar loan for four months at an APR of 9%. Luther's bank requires that the firm maintain a compensating balance equal to 5% of the loan amount in a non-interest bearing account and the bank charges a 1% origination fee. Calculate the the effective annual rate EAR for this loan.
Q4) Calculate the temporary working capital needs for each of the four quarters for Hasbeen Toys.
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Chapter 28: Mergers and Acquisitions
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Q1) The merger of two companies in the same industry that make products required at different stages of the production cycle is called:
A) economies of scope.
B) vertical integration.
C) economies of scale.
D) horizontal integration.
Q2) Assume that Martin pays no premium to acquire Luther. Calculate Martin's price-earnings (P/E) ratio both pre and post merger.
Q3) This period is known as the conglomerate wave because firms typically acquired firms in unrelated businesses:
A) 1960s
B) 1970s
C) 1980s
D) 1990s
Q4) In a ________ merger, the target and the acquirer operate in the same industry.
A) conglomerate
B) vertical
C) horizontal
D) diagonal
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Chapter 29: Corporate Governance
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Q1) Which of the following statements is FALSE?
A) The United States is somewhat of an exception, in that it focuses solely on maximizing shareholder welfare.
B) A controlling family has many opportunities to expropriate minority shareholders in a pyramid structure.
C) One way for families to gain control over firms even when they do not own more than half the shares is to issue dual class shares-a scenario in which companies have more than one class of shares and one class has superior voting rights over the other class.
D) Researchers have claimed that the degree of investor protection was largely determined by the legal origin of the country-specifically, whether its legal system was based on British common law (less protection) or French, German, and Scandinavian civil law (more protection).
Q2) Which of the following is NOT a direct action that can be taken by shareholders?
A) Submitting shareholder resolutions directing the board to take specific actions
B) Withholding votes for the board of directors candidates
C) Initiating a proxy contest
D) Voting to remove the management team
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Chapter 30: Risk Management
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Q1) The duration of a five-year bond with 8% annual coupons trading at par is closest to:
A) 2.5 Years
B) 4.3 Years
C) 5.0 Years
D) 6.2 Years
Q2) Which of the following statements is FALSE?
A) Currency options allow firms to lock in a future exchange rate; currency forward contracts allow firms to insure themselves against the exchange rate moving beyond a certain level.
B) Generally speaking, cash-and-carry strategies are used primarily by large banks, which can borrow easily and face low transaction costs.
C) Currency options, like the stock options, give the holder the right-but not the obligation-to exchange currency at a given exchange rate.
D) Many managers want the firm to benefit if the exchange rate moves in their favor, rather than being stuck paying an above-market rate.
Q3) What is the actuarially fair cost of full insurance?
Q4) What are some of the disadvantages of long-term supply contracts?
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Chapter 31: International Corporate Finance
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Q1) The present value of the £5 million cash inflow computed by first discounting the £s and then converting into dollars is closest to:
A) $8,961,420
B) $8,950,495
C) $8,954,615
D) $8,943,695
Q2) Which of the following statements is FALSE?
A) If the U.S. tax rate exceeds the combined tax rate on all foreign income, it is valid to assume that the firm pays the same tax rate on all income no matter where it is earned.
B) Firms can lower their taxes by pooling multiple foreign projects and accelerating the repatriation of earnings.
C) Under U.S. tax law, multinational corporations may use any excess tax credits generated in high-tax foreign countries to offset their net U.S. tax liabilities on earnings in low-tax foreign countries.
D) If the foreign tax rate exceeds the U.S. tax rate, because the U.S. tax credit exceeds the amount of U.S. taxes owed, no tax is owed in the United States.
Q3) What is the pound present value of the project?
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