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1) A corporation has $5,000,000 of 10 percent bonds and $3,000,000

Customer Question

1) A corporation has $5,000,000 of 10 percent bonds and $3,000,000 of 12 percent preferred stock outstanding. The firm's financial breakeven (assuming a 40 percent tax rate) is $________.
a) $ 860,000
b) $ 716,000
c) $ 1,400,000
d) $ 1,100,000

2) Nico Trading Company must choose its optimal capital structure. Currently, the firm has a 20 percent debt ratio and the firm expects to generate a dividend next year of $5.44 per share. Dividends are expected to remain at this level indefinitely. Stockholders currently require a 12.1 percent return on their investment. Nico is considering changing its capital structure if it would benefit shareholders. The firm estimates that if it increases the debt ratio to 30 percent, it will increase its expected dividend to $ 5.82 per share. Again, dividends are expected to remain at this new level indefinitely. However, because of the added risk, the required return demanded by stock holders will increase to 12.6 percent. Based on this information, should Nico make the change?
a) yes
b) no
c) irrelevant
d) not enough information

3) At the quarterly meeting of Tangshan Mining Corporation, held on September 10th, the directors declared a $ 1.00 per share dividend for the firm’s 100,000 shares of common stock outstanding. The net effect of declaring and paying this dividend would be to
a) increase total assets by $ 100,000 and decrease stockholders equity by $ 100,000
b) increase total assets by $ 100,000 and increase stockholders equity by $ 100,000
c) decrease total assets by $ 100,000 and decrease stockholders equity by $ 100,000
d) decrease total assets by $ 100,000 and increase stockholders equity by $ 100,000

4) Tangshan Mining has common stock at par of $ 200,000, paid in capital in excess of par of $ 400,000, and retained earnings of $ 280,000. In states where the firm’s legal capital is defined as the par value of common stock, the firm could pay out ____
in cash dividends without impairing its capital.
a) $200,000
b) $ 880,000
c) $ 600,000
d) $ 680,000

5) A firm has current after-tax earnings of $ 1,000,000 and has declared a cash dividend of $ 400,000. The firm’s dividend payout ratio is
a) 4.0 percent
b) 2.0 percent
c) 2.5 percent
d) 40 percent

6) Mr. R. owns 20,000 shares of ABC Corp. stock. The company is planning to issue a stock dividend. Before the dividend Mr. R. owned 10 percent of the outstanding stock, which had a market value of $ 200,000, or $ 10 pe share. Upon receiving the 10 percent stock dividend the value of his shares is
a) $ 210,000
b) $ 200,000
c) 220,000
d) greater, but cannot be determined.

7) The accounting in a stock split will transfer funds
a) from the Retained Earnings account to the Paid in Capital account.
b) from the Common Stock and Paid in Capital accounts to the Retained earnings account.
c) from the Paid in Capital account to the Retained Earnings account.
d) from the Retained Earnings account to the Preferred Stock account.
e) none of the above

8) When purchasing outstanding shares of common stock a firm can utilize all of the following methods EXCEPT:
a) a tender offer at a specified price
b) a purchase on the open market at market prices
c) a tender offer at varying prices
d) by purchasing a large block on a negotiated basis

9) In the EBIT-EPS approach to capital structure, risk is represented by
a) shifts in the times-interest-earned ratio
b) shifts in the cost of debt capital
c) the slope of the capital structure line
d) shifts in the cost of equity capital

10) A firm that has a large percentage of ___ investors may pay out a lower percentage of its earnings as dividends
a) wealthy
b) business
c) middle-income
d) pension fund

11) Noncash changes such as depreciation and amortization ___ the firm’s breakeven point.
a) decrease
b) understate
c) overstate
d) do not affect



12) The ___ the coefficient of variation, the ___ the risk
a) more stable, higher
b) lower; higher
c) lower; lower
d) higher; lower

13) Combining two assets having perfectly negatively correlated returns will result in the creation of a portfolio with an overall risk that
a) decrease to a level below that of either asset
b) increase to a level above that of either asset
c) remains unchanged
d) stabilizes to a level between the asset with the higher risk and the asset with the lower risk

14) An increase in the U.S. Treasury Bill rate ___ the required rate of return of a common stock
a) has no effect on
b) decreases
c) increases
d) cannot be determined by

15) The ___ rate of interest is typically the required rate of return on a three-month U.S. Treasury bill
a) nominal
b) premium
c) risk-free
d) real
Submitted: 1 year ago.
Category: Homework
Expert:  Linda_us replied 1 year ago.
Welcome back.

I can help you with these questions. Please let me know your deadline.
Expert:  Linda_us replied 1 year ago.
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Experience: Post Graduate Diploma in Management (MBA)
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Customer: replied 1 year ago.

Thank you for your quick response. I don't know how to rate your response yet until they grade my homework.


Please advise on the usual procedure.


On a separate note, do you tutor in other MBA subjects as well?


Thanks.

Expert:  Linda_us replied 1 year ago.

Rating is done via clicking smiley face (Excellent/Good/ok) on the response where I provided the solution (only if you are satisfied). I do help with MBA subject as well. I have done lot of assignment for MBA students. You can request me in future by writing "FOR LINDA" at start of your post.

Customer: replied 1 year ago.

Thank you for your excellent and quick service.

Expert:  Linda_us replied 1 year ago.

You are welcome. If you need help in future feel free to request me by writing "FOR LINDA" at start of your post.

 

Here is the link to my profile page

 

http://www.justanswer.com/multiple-problems/7ul8u-target-capital-structure-qm-industries-40-common.html

Customer: replied 1 year ago.

Hello Linda;


I need help with these questions.I think you were fantastic before. Can you help? How much, and how fast you can complete? Thanks.


1) Which of the following legal forms of organization is characterized by limited


liability?


a. Professional partnership


b. Sole proprietorship


c. Corporation


d. Partnership


 


2) The financial manager may be responsible for any of the following EXCEPT


a. keeping track of quarterly tax payments.


b. analyzing quarterly budget and performance reports.


c. analyzing the effects of more debt on the firm’s capital structure.


d. determining whether to accept or reject a capital asset acquisition.


 


3) The financial manager’s financing decisions determine


a. both the mix and the type of assets found on the firm’s balance sheet.


b. both the mix and the type of assets and liabilities found on the firm’s balance


sheet.


c. the most appropriate mix of short-term and long-term financing.


d. the proportion of the firm’s earnings to be paid as dividend.


 


4) Wealth maximization as the goal of the firm implies enhancing the wealth of


a. the firm’s stockholders.


b. the Board of Directors.


c. the firm’s employees.


d. the federal government.


 


5) The amount earned during the accounting period on each outstanding share


of common stock is called


a. common stock dividend.


b. net profits after taxes.


c. earnings per share.


d. net income.


 


6) Cash flow and risk are the key determinants in share price. Increased cash


flow results in ________, other things remaining the same.


a. an unchanged share price


b. a lower share price


c. an undetermined share price


d. a higher share price


 


7) A more recent issue that is causing major problems in the business community


is


a. short-term versus long-term financial goals of management.


b. the privatization of ownership.


c. ethical problems.


d. environmental concerns.


 


8) The implementation of a pro-active ethics program is expected to result in


a. a positive corporate image and increased respect, but is not expected to affect


cash flows.


b. a positive corporate image and increased respect, but is not expected to affect


share price.


c. an increased share price resulting from a decrease in risk, but is not expected


to affect cash flows.


d. a positive corporate image and increased respect, a reduction in risk, and enhanced


cash flow resulting in an increase in share price.


 


9) The Sarbanes-Oxley Act of 2002 was passed in response to


a. the decline in technology stocks.


b. insider trading activities.


c. false disclosures in financial reporting.


d. all of the above


 


10) The key participants in financial transactions are individuals, businesses,


and governments. Individuals are net ________ of funds, and businesses are


net ________ of funds.


a. demanders; suppliers


b. purchasers; sellers


c. suppliers; demanders


d. users; providers


 


11) The over-the-counter (OTC) market is


a. an intangible market for unlisted securities.


b. a place where securities are bought and sold.


c. the New York Stock Exchange.


d. an organized stock exchange.


 


12) The two key financial markets are


a. primary market and secondary market.


b. capital market and secondary market.


c. primary market and money market.


d. money market and capital market.


 


13) Securities exchanges create efficient markets that do all of the following


EXCEPT


a. ensure a market in which the price reflects the true value of the security.


b. control the supply and demand for securities through price.


c. allocate funds to the most productive uses.


d. allow the price to be determined by supply and demand of securities.


 


14) The tax deductibility of various expenses such as general and administrative


expenses ________ their after-tax cost.


a. reduces


b. has no effect on


c. has an undetermined effect on


d. increases


 


15) The dividend exclusion for corporations receiving dividends from another


corporation has resulted in


a. stock investments being relatively less attractive, relative to bond investments


made by one corporation in another corporation.


b. stock investments being relatively more attractive relative to bond investments


made by one corporation in another corporation.


c. a lower cost of equity for the corporation paying the dividend.


d. a higher relative cost of bond-financing for the corporation paying the dividend.


 


16) The rule-setting body, which authorizes generally accepted accounting principles


is


a. FASB.


b. Federal Reserve System.


c. SEC.


d. GAAP.


 


17) Candy Corporation had pretax profits of $1.2 million, an average tax rate


of 34 percent, and it paid preferred stock dividends of $50,000. There were


100,000 shares outstanding and no interest expense. What were Candy Corporation’s


earnings per share?


a. $4.52


b. $7.59


c. $7.42


d. $3.91


 


18) The analyst should be careful when evaluating a ratio analysis that


a. the dates of the financial statements being compared are the same time.


b. pre-audited statements are used.


c. neither A nor B.


d. both A and B.


 


19) The ________ is useful in evaluating credit and collection policies.


a. current asset turnover


b. current ratio


c. average collection period


d. average payment period


 


20) The ________ ratio may indicate poor collections procedures or a lax credit


policy.


a. average collection period


b. average payment period


c. inventory turnover


d. quick


 


21) ________ are especially interested in the average payment period, since it


provides them with a sense of the bill-paying patterns of the firm.


a. Lenders and suppliers


b. Borrowers and buyers


c. Stockholders


d. Customers


 


22) If the inventory turnover is divided into 365, it becomes a measure of


a. sales turnover.


b. the average collection period.


c. sales efficiency.


d. the average age of the inventory.


 


23) The ________ ratio may indicate that the firm will not be able to meet interest


obligations due on outstanding debt.


a. times interest earned


b. return on total assets


c. net profit margin


d. debt


 


24) The ________ measures the percentage of profit earned on each sales dollar


before interest and taxes.


a. net profit margin


b. operating profit margin


c. earnings available to common shareholders


d. gross profit margin


 


25) In the DuPont system, the return on total assets (asset) is equal to


a. (net profit margin) × (fixed asset turnover).


b. (return on equity) × (total asset turnover).


c. (return on equity) × (financial leverage multiplier).


d. (net profit margin) × (total asset turnover).


 


26) The financial leverage multiplier is an indicator of how much ________ a


corporation is utilizing.


a. long-term debt


b. total debt


c. operating leverage


d. total assets


 


27) Allocation of the historic costs of fixed assets against the annual revenue they


generate is called


a. amortization.


b. net profits.


c. depreciation.


d. gross profits.


 


28) The cash flows from operating activities section of the statement of cash


flows considers


a. interest expense.


b. stock repurchases.


c. dividends paid.


d. cost of raw materials.


 


29) The key aspects of the financial planning process are


a. cash planning and investment planning.


b. cash planning and profit planning.


c. investment planning and profit planning.


d. cash planning and financing.


 


30) A firm has projected sales in May, June, and July of $100, $200, and $300,


respectively. The firm makes 20 percent of sales for cash and collects the


balance one month following the sale. The firm’s total cash receipts in July


a. are $200.


b. are $220.


c. are $180.


d. cannot be determined with the information provided.


 


31) A projected excess cash balance for the month may be


a. financed with long-term securities.


b. invested in marketable securities.


c. financed with short-term securities.


d. invested in long-term securities.


 


32) In the month of August, a firm had total cash receipts of $10,000, total cash


disbursements of $8,000, depreciation expense of $1,000, a minimum cash


balance of $3,000, and a beginning cash balance of $500. The excess cash


balance (required financing) for August is


a. required total financing of $500.


b. required total financing of $2,500.


c. excess cash balance of $500.


d. excess cash balance of $5,500.


 


33) The key inputs for preparing pro forma income statements using the simplifi


ed approaches are the


a. sales forecast for the preceding year and financial statements for the coming


year.


b. sales forecast for the coming year and the cash budget for the preceding year.


c. cash budget for the coming year and sales forecast for the preceding year.


d. sales forecast for the coming year and financial statements for the preceding


year.


 


34) The ________ method of developing a pro forma balance sheet estimates values


of certain balance sheet accounts while others are calculated. In this


method, the firm’s external financing is used as a balancing, or plug, figure.


a. cash


b. accrual


c. judgmental


d. percent-of-sales


 


35) The strict application of the percent-of-sales method to prepare a pro forma


income statement assumes the firm has no fixed costs. Therefore, the use of


the past cost and expense ratios generally tends to ________ profits when


sales are increasing.


a. have no effect on


b. accurately predict


c. overstate


d. understate


 


36) A firm plans to retire outstanding bonds in the next planning period. The


statements that will be affected are the


a. pro forma balance sheet and cash budget.


b. pro forma income statement and pro forma balance sheet.


c. cash budget and statement of retained earnings.


d. pro forma income statement, pro forma balance sheet, cash budget, and


statement of retained earnings.


 


37) Utilizing past cost and expense ratios (percent-of-sales method) when preparing


pro forma financial statements will tend to


a. overstate profits when sales are increasing.


b. neither understate nor overstate profits.


c. understate profits when sales are increasing.


d. understate profits when sales are decreasing.


 


38) In a period of rising sales utilizing past cost and expense ratios (percent of-


sales method), when preparing pro forma financial statements and planning


financing, will tend to


a. overstate retained earnings and understate the financing needed.


b. overstate retained earnings and overstate the additional financing needed.


c. understate retained earnings and overstate the financing needed.


d. understate retained earnings and understate the additional financing needed.


 


39) For positive interest rates, the future value interest factor is


a. sometimes negative.


b. always greater than 1.0.


c. never greater than 25.


d. always less than 0.


 


40) The amount of money that would have to be invested today at a given interest


rate over a specified period in order to equal a future amount is called


a. present value.


b. future value.


c. future value interest factor.


d. present value interest factor.


 


41) The present value of $200 to be received 10 years from today, assuming an


opportunity cost of 10 percent, is


a. $200.


b. $50.


c. $518.


d. $77.


 


42) The future value of a dollar ________ as the interest rate increases and


________ the farther in the future an initial deposit is to be received.


a. increases; increases


b. decreases; increases


c. decreases; decreases


d. increases; decreases


 


43) The present value of a $25,000 perpetuity at a 14 percent discount rate is


a. $350,000.


b. $285,000.


c. $178,571.


d. $219,298.


 


44) The future value of $100 received today and deposited in an account for four


years paying semiannual interest of 6 percent is


a. $450.


b. $889.


c. $134.


d. $126.


 


45) The future value of an annuity of $1,000 each quarter for 10 years, deposited


at 12 percent compounded quarterly is


a. $75,401.


b. $17,549.


c. $93,049.


d. $11,200.


 


46) Adam borrows $4,500 at 12 percent annually compounded interest to be


repaid in four equal annual installments. The actual end-of-year payment is


a. $2,641.


b. $1,125.


c. $942.


d. $1,482.


 


47) Ashley owns stock in a company which has consistently paid a growing dividend


over the last five years. The first year Ashley owned the stock, she received


$1.71 per share and in the fifth year, she received $2.89 per share.


What is the growth rate of the dividends over the last five years?


a. 7 percent


b. 5 percent


c. 14 percent


d. 12 percent


 


48) Julian was given a gold coin originally purchased for $1 by his great-grandfather


50 years ago. Today the coin is worth $450. The rate of return realized


on the sale of this coin is approximately equal to


a. 13%.


b. 50%.


c. 7.5%.


d. cannot be determined with given information.


 


49) Aunt Bertha borrows $19,500 from the bank at 8 percent annually compounded


interest to be repaid in 10 equal annual installments. The interest


paid in the third year is ________.


a. $1,947.10


b. $1,336.00


c. $2,906.11


d. $1,560.14


 


50) What annual rate of return would Grandma Zoe need to earn if she deposits


$1,000 per month into an account beginning one month from today in order


to have a total of $1,000,000 in 30 years?


a. 5.98%


b. 5.28%


c. 6.23%


d. 4.55%


 


51) ________ is the chance of loss or the variability of returns associated with a


given asset.


a. Value


b. Probability


c. Risk


d. Return


 


52) The goal of an efficient portfolio is to


a. minimize profit in order to minimize risk.


b. maximize risk for a given level of return.


c. maximize risk in order to maximize profit.


d. minimize risk for a given level of return.


 


53) Combining negatively correlated assets having the same expected return


results in a portfolio with ________ level of expected return and ________


level of risk.


a. the same; a lower


b. a lower; a higher


c. a higher; a lower


d. the same; a higher


 


54) The purpose of adding an asset with a negative or low positive beta is to


a. reduce risk.


b. increase profit.


c. reduce profit.


d. increase risk.


 


55) The portion of an asset’s risk that is attributable to firm-specific, random


causes is called


a. unsystematic risk.


b. systematic risk.


c. nondiversifiable risk.


d. none of the above


 


56) ________ risk represents the portion of an asset’s risk that can be eliminated


by combining assets with less than perfect positive correlation.


a. Systematic


b. Total


c. Nondiversifiable


d. Diversifiable


 


57) Nico owns 100 shares of stock X which has a price of $12 per share and 200


shares of stock Y which has a price of $3 per share. What is the proportion of


Nico’s portfolio invested in stock X?


a. 50%


b. 77%


c. 67%


d. 33%


 


58) As risk aversion increases


a. investors’ required rate of return will decrease.


b. a firm’s beta will decrease.


c. a firm’s beta will increase.


d. investors’ required rate of return will increase.


 


59) The ________ rate of interest creates equilibrium between the supply of savings


and the demand for investment funds.


a. inflationary


b. risk-free


c. real


d. nominal


 


60) The ________ rate of interest is typically the required rate of return on a


three-month U.S. Treasury bill.


a. premium


b. real


c. nominal


d. risk-free


 


61) An upward-sloping yield curve that indicates generally cheaper short-term


borrowing costs than long-term borrowing costs is called


a. fl at yield curve.


b. normal yield curve.


c. inverted yield curve.


d. none of the above.


 


62) The cost of long-term debt generally ________ that of short-term debt.


a. has no relation to


b. is less than


c. is equal to


d. is greater than


 


63) ________ is a paid individual, corporation, or commercial bank trust department


that acts as a third party to a bond indenture to ensure that the issuer


does not default on its contractual responsibilities to the bondholders.


a. A trustee


b. A bond rating agency


c. A bond issuer


d. An investment banker


 


64) An example of a standard debt provision is the


a. constraints on subsequent borrowing.


b. requirement to pay taxes and other liabilities when due.


c. limiting of the corporation’s annual cash dividend payments.


d. restricting the corporation from disposing of fixed assets.


 


65) Another name for a deeply discounted bond that pays no coupon interest is a


a. floating rate bond.


b. junk bond.


c. subordinated debenture.


d. zero coupon bond.


 


66) A debenture is


a. a secured bond that is secured by unspecified assets.


b. a lengthy legal document stating the conditions under which a bond has been


issued.


c. an unsecured bond that only creditworthy firms can issue.


d. a bond secured by specific asset.


 


67) In utilizing a ________ the issuer can annually deduct the current year’s interest


accrual without having to actually pay the interest until the bond matures.


a. junk bond


b. extendible notes


c. zero coupon bond


d. floating rate bond


 


68) The less certain a cash flow, the ________ the risk, and the ________ the


present value of the cash flow.


a. higher; higher


b. lower; lower


c. higher; lower


d. lower; higher


 


69) Jia Hua Enterprises wants to issue sixty 20-year, $1,000 par value, zero coupon


bonds. If each bond is priced to yield 7 percent, how much will Jia


Hua receive (ignoring issuance costs) when the bonds are first sold?


a. $12,393


b. $15,505


c. $18,880


d. $11,212


e. $20,000


 


70) If bankruptcy were to occur, stockholders would have prior claim on assets


over


a. preferred stockholders.


b. unsecured creditors.


c. secured creditors.


d. no one.


 


71) The advantages of issuing preferred stock from the common stockholder’s


perspective include all of the following EXCEPT


a. increased leverage.


b. flexibility.


c. use in mergers.


d. seniority of preferred stockholder’s claim over common stockholders.


 


72) All of the following features may be characteristic of preferred stock EXCEPT


a. convertible.


b. no maturity date.


c. callable.


d. tax-deductible dividends.


 


73) Preferred stockholders


a. do have preference over bondholders in the case of liquidation.


b. do not have preference over bondholders in the case of liquidation.


c. do not have preference over common stockholders in the case of liquidation.


d. two of the above are true statements


 


74) The opportunity for management to purchase a certain number of shares of


their firm’s common stock at a specified price over a certain period of time


is a


a. stock option.


b. stock right.


c. pre-emptive right.


d. warrant.


 


75) Stock rights provide the stockholder with


a. cumulative voting privileges.


b. the opportunity to receive extraordinary earnings.


c. the right to elect the board of directors.


d. certain purchase privileges of additional stock shares in direct proportion


based on their number of owned shares.


 


76) Tangshan China Company’s stock is currently selling for $80.00 per share.


The expected dividend one year from now is $4.00 and the required return is


13 percent. What is Tangshan’s dividend growth rate assuming that dividends


are expected to grow at a constant rate forever?


a. 9%


b. 10%


c. 8%


d. 11%


 


77) Which of the following valuation methods is superior to the others in the list


since it considers expected earnings?


a. P/E multiple


b. liquidation value


c. book value


d. present value of the interest


 


78) Nico Corporation expects to generate free-cash flows of $200,000 per year


for the next five years. Beyond that time, free cash flows are expected to grow


at a constant rate of 5 percent per year forever. If the firm’s average cost of


capital is 15 percent, the market value of the firm’s debt is $500,000, and


Nico has a half million shares of stock outstanding, what is the value of


Nico’s stock?


a. $0.00


b. $1.43


c. $3.43


d. $2.43


 


79) A capital expenditure is all of the following EXCEPT


a. an outlay for current asset expansion.


b. an outlay made for the earning assets of the firm.


c. commonly used to expand the level of operations.


d. expected to produce benefits over a period of time greater than one year.


 


80) ________ projects have the same function; the acceptance of one ________


the others from consideration.


a. Mutually exclusive; eliminates


b. Replacement; does not eliminate


c. Capital; eliminates


d. Independent; does not eliminate


 


81) In international capital budgeting decisions, political risks can be minimized


using all of the following strategies EXCEPT


a. structuring the financing of such investments as equity rather than as debt.


b. structuring the financing of such investments as debt rather than as equity.


c. structuring the investment as a joint venture and selecting well-connected


local partner.


d. none of the above


 


82) When evaluating a capital budgeting project, the change in net working capital


must be considered as part of


a. the initial investment.


b. the incremental operating cash inflows.


c. the operating cash inflows.


d. the operating cash outflows.


 


83) The tax treatment regarding the sale of existing assets that are sold for their


book value results in


a. recaptured depreciation taxed as ordinary income.


b. no tax benefit or liability.


c. an ordinary tax benefit.


d. a capital gain tax liability and recaptured depreciation taxed as ordinary income.


 


84) A corporation is selling an existing asset for $1,000. The asset, when purchased,


cost $10,000, was being depreciated under MACRS using a five year


recovery period, and has been depreciated for four full years. If the as


sumed tax rate is 40 percent on ordinary income and capital gains, the tax


effect of this transaction is


a. $3,600 tax liability.


b. $280 tax benefit.


c. $0 tax liability.


d. $1,100 tax liability.


 


85) Unsophisticated capital budgeting techniques do not


a. examine the size of the initial outlay.


b. take into account an unconventional cash flow pattern.


c. explicitly consider the time value of money.


d. use net profits as a measure of return.


 


86) Should Tangshan Mining company accept a new project if its maximum payback


is 3.5 years and its initial after tax cost is $5,000,000 and it is expected


to provide after-tax operating cash inflows of $1,800,000 in year 1,


$1,900,000 in year 2, $700,000 in year 3 and $1,800,000 in year 4?


a. Yes


b. No


c. It depends


d. None of the above


 


87) The minimum return that must be earned on a project in order to leave the


firm’s value unchanged is


a. the compound rate.


b. the cost of capital.


c. the interest rate.


d. the internal rate of return.


 


88) A firm would accept a project with a net present value of zero because


a. the project would enhance the wealth of the firm’s owners.


b. the return on the project would be positive.


c. the project would maintain the wealth of the firm’s owners.


d. the return on the project would be zero.


 


89) What is the NPV for the following project if its cost of capital is 15 percent


and its initial after tax cost is $5,000,000 and it is expected to provide


after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year


2, $1,700,000 in year 3 and $1,300,000 in year 4?


a. ($137,053)


b. $371,764


c. $1,700,000


d. None of the above


 


90) What is the NPV for the following project if its cost of capital is 0 percent and


its initial after tax cost is $5,000,000 and it is expected to provide after tax


operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2,


$1,700,000 in year 3 and $1,300,000 in year 4?


a. $1,700,000


b. $137,053


c. $371,764


d. None of the above


 


91) The ________ is the compound annual rate of return that the firm will earn if


it invests in the project and receives the given cash inflows.


a. internal rate of return


b. cost of capital


c. discount rate


d. opportunity cost


 


92) When evaluating projects using internal rate of return,


a. the discount rate and magnitude of cash flows do not affect internal rate of


return.


b. projects having higher early-year cash flows tend to be preferred at lower


discount rates.


c. projects having higher early-year cash flows tend to be preferred at higher


discount rates.


d. projects having lower early-year cash flows tend to be preferred at higher


discount rates.


 


93) Diagrams that permit the mapping of the various investment decision alternatives


and payoffs as well as their probabilities of occurrence are called


a. multiple regression analysis.


b. simulations.


c. decision trees.


d. sensitivity analysis.


 


94) The advantage of using simulation in the capital budgeting process is


a. the availability of a continuum of risk-return trade-offs which may be used as


the basis for decision-making.


b. that it generates a continuum of risk-return trade-offs rather than a single point


estimate.


c. dependability of predetermined probability distributions.


d. ease of calculation.


 


95) Breakeven cash inflow refers to


a. the minimum level of cash inflow necessary for a project to be acceptable,


that is, IRR < cost of capital.


b. the minimum level of cash inflow necessary for a project to be acceptable,


that is, NPV > $0.


c. the minimum level of cash inflow necessary for a project to be acceptable,


that is, NPV < $0.


d. none of the above is correct


 


96) A behavioral approach that evaluates the impact on the firm’s return of simultaneous


changes in a number of project variables is called


a. simulation analysis.


b. scenario analysis.


c. sensitivity analysis.


d. none of the above


 


97) The ________ reflects the return that must be earned on the given project to


compensate the firm’s owners adequately according to the project’s variability


of cash flows.


a. internal rate of return


b. cost of capital


c. average rate of return


d. risk-adjusted discount rate


 


98) An approach to capital rationing that involves graphing project returns in


descending order against the total dollar investment to determine the group


of acceptable projects is called the


a. net present value approach.


b. the internal rate of return approach.


c. the profitability index approach.


d. the payback approach.


 


99) The cost to a corporation of each type of capital is dependent upon


a. the risk-free rate of each type of capital plus the business risk and the financial


risk of the firm.


b. the risk-free rate of each type of capital plus the business risk of the firm.


c. the risk-free rate of each type of capital plus the financial risk of the firm.


d. the risk-free rate of bonds plus the business risk of the firm.


 


100) The before-tax cost of debt for a firm which has a 40 percent marginal tax rate


is 12 percent. The after-tax cost of debt is


a. 12 percent.


b. 7.2 percent.


c. 4.8 percent.


d. 6.0 percent.


 

Expert:  Linda_us replied 1 year ago.

Welcome back.

 

I can help you with these questions. Whats your deadline and total offer for these questions?

Customer: replied 1 year ago.

Hello;


Thanks for the quick answer. I would like to have the answers soon, maybe today or by tomorrow. How soon do you think you could finish it?


I don't know exactly how much to offer. Please advise on the preferred price.


Thank you.

Expert:  Linda_us replied 1 year ago.

 

I will try to complete it tonight or maximum by tomorrows night. Considering total of 100 questions I think the fair price should be in the range of $90-$130. I can update you about the exact price once I start working on it and the total time I have to spend.

 

You can create a new post for $30-40 and just write "FOR LINDA" at start of it as I already got the questions here. Once I post the solution I will let you know the complete amount and you can add remaining amount as Bonus.

Customer: replied 1 year ago.

I guess that sounds about fair. Why don't we just make it $ 100 even to make it easy? Would you agree?

Expert:  Linda_us replied 1 year ago.
Okay, please create a post as discussed.
Customer: replied 1 year ago.

OK. Thank you.


I don't mean to be difficult, but I have tried creating a new post with the first subject line in the box "FOR LINDA", but when it moves forward, some other tutor's name comes up. The minimum the computer excepts is $ 40, and I can't post more than 19 questions into the box.


Please clarify to be sure, how can I make sure my post is going to go to you?


Thank you, XXXXX XXXXX for my confusion.

Expert:  Linda_us replied 1 year ago.
Yes, I have informed the moderators of this error. It has come up many times.

You can upload the entire set on an external site like www.box.com or www.mediafire.com and share the link in the Question.

I will send you a link in a few minutes where you can post the question by writing FOR LINDA and the post will be forwarded to me. In the meanwhile you can upload the file as I suggested.
Expert:  Linda_us replied 1 year ago.

You have already posted 100 questions above. Those are the once you want me to solve correct? You can use this link to request me

 

http://www.justanswer.com/profile.aspx?PF=19873544&FID=8337

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