13435599
Descripción
Test por Mitzel Montero, actualizado hace más de 1 año
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Creado por Mitzel Montero
hace más de 6 años
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Pregunta 1
Pregunta
Taxes are a relevant cost that should be accounted for in the firm’s weighted average cost of capital.
Respuesta
- True
- False
Pregunta 2
Pregunta
Preferred stock has higher seniority than bonds and common stock
Respuesta
- True
- False
Pregunta 3
Pregunta
The cost of capital raised by the issuance of bonds is typically lower than the cost of capital raised from the issuance of preferred stock or common stock
Respuesta
- True
- False
Pregunta 4
Pregunta
The weights in a firm’s weighted average cost of capital should be a measure of the firm’s target capital structure
Respuesta
- True
- False
Pregunta 5
Pregunta
Issuance or flotation costs are the costs investors pay to brokers when they purchase common stock
Respuesta
- True
- False
Pregunta 6
Pregunta
Which of the following is typically not treated as one of the components of capital in cost of capital schedule calculations
Respuesta
-
common equity
-
long term debt
-
preferred stock
-
short term debt
Pregunta 7
Pregunta
A firm's weighed average cost of capital is based on investors required rates of return on a firms securities and target capital structure
Respuesta
- True
- False
Pregunta 8
Pregunta
Cost of capital is concerned with the cost of
Respuesta
-
short term sources of funds
-
long term sources of funds
Pregunta 9
Pregunta
Issuance costs cause the cost of funds from securities to be lower than the investor return
Respuesta
- True
- False
Pregunta 10
Pregunta
_______ is the firms minimum required rate of return on investments
Respuesta
-
target capital structure
-
weighted average cost of capital
-
cost of capital
Pregunta 11
Pregunta
Which has the highest seniority
Respuesta
-
common stock
-
bonds
-
preferred stock
Pregunta 12
Pregunta
Which is the riskiest corporate security
Respuesta
-
bonds
-
common stock
-
preferred stock
Pregunta 13
Pregunta
Funds come from outside the firm
Respuesta
-
Internal Equity
-
External Equity
Pregunta 14
Pregunta
The firm reinvests profits and provides funds internally
Respuesta
-
internal equity
-
external equity
Pregunta 15
Pregunta
Why is external common equity capital more expensive then internal common equity capital
Respuesta
-
Because internal is free, it has no cost since there is no need to attract investors to raise internal equity
-
Because the cost of external must take into account flotation costs, internal does not
-
Actually, external equity is not more expensive than internal, they both have the same cost
-
Because the capital asset pricing model is used to estimate the cost of internal and the dividend valuation model is used to estimate cost of external
Pregunta 16
Pregunta
__________ represents the long-term or permanent sources of the firm’s financing
Respuesta
-
Equity structure
-
Financial Structure
-
Leverage Structure
-
Capital Structure
Pregunta 17
Pregunta
Which model is typically used to estimate the cost of using external equity capital
Respuesta
-
arbitrage pricing theory model
-
rate of return on perpetuity model
-
dividend valuation model
-
capital asset pricing model
Pregunta 18
Pregunta
The cost of raising capital with debt is typically less costly for a firm than raising capital with preferred stock. Which one of the following is one of the reasons for this?
Respuesta
-
Bonds generally have a longer maturity than preferred stocks
-
Preferred stocks are more senior than bonds
-
The interest from bonds is compounded more frequently than the dividends from preferred stocks
-
Interest is a tax-deductible cost, preferred dividends are not
Pregunta 19
Pregunta
Tokyo Food Supplies Corporation sold an issue of 12-year bonds. The bonds sold at $980 each. After issuance costs, Tokyo Food Supplies received $975 each. The maturity value is $1,000 each and the coupon rate is 9% and paid annually. What is the after-tax cost of debt for these bonds if Tokyo Food Supplies’ marginal tax rate is 40%?
Respuesta
-
9.36%
-
5.61%
-
9.28%
-
5.57%
Pregunta 20
Pregunta
Young’s Specialized Cruises plans to issue preferred stock at a price of $25 per share. The annual dividend will be $2.18 per share and issuance costs are expected to be $2.00 per share. What is the cost of raising funds with preferred stock for Young?
Respuesta
-
9.48%
-
8.76%
-
8.72%
-
8.00%
Pregunta 21
Pregunta
Spencers Magic Shows Incorporated is financed 100% with equity and intends to remain this way. Spencers’ common stock beta is 0.85, the expected market return (average market return) is 14%, and the risk-free rate is 6%. If all of Spencers’ equity is internal, what are the cost of equity and the weighted average cost of capital for Spencers?
Respuesta
-
13.10%
-
12.80%
-
14.00%
-
5.48%
Pregunta 22
Pregunta
Shamas Famous Restaurants expects to pay a common stock dividend of $1.50 per share next year (d1). Dividends are expected to grow at a 4% rate for the foreseeable future. Shamas’ common stock is selling for $18.50 per share and issuance costs are $3.50 per share. What is Shamas cost of internal equity?
Respuesta
-
12.11%
-
20.59%
-
10.00%
-
14.00%
Pregunta 23
Pregunta
Marion’s Miraculous Resorts has a current capital structure that is 50% equity, 40% debt, and 10% preferred stock. This is considered optimal. Marion is considering a $40 million capital budgeting project. Marion has estimated the following:
After-tax cost of debt: 8.5%
Cost of preferred stock: 9.5%
Cost of internal equity: 14.0%
If all equity comes from internal sources, what should Marion’s cost of capital be for this project?
Respuesta
-
11.35%
-
9.45%
-
12.15%
-
10.67%
Pregunta 24
Pregunta
Which model(s) is used to estimate the cost of using internal equity?
Respuesta
-
Capital Asset Pricing Model
-
Dividend Valuation Model
-
Bond yield plus risk premium
Pregunta 25
Pregunta
The discounted payback period does not take into account the time value of money
Respuesta
- True
- False
Pregunta 26
Pregunta
The net present value is the ratio of a project’s benefits to its costs and the profitability index is the difference between a project’s benefits and its costs
Respuesta
- True
- False
Pregunta 27
Pregunta
A project’s payback period is the amount of time required for the project’s net cash flows to recover or pay back the net investment
Respuesta
- True
- False
Pregunta 28
Pregunta
A project’s net present value is the sum of the future values of the net cash flows compounded at the required rate of return minus the net investment
Respuesta
- True
- False
Pregunta 29
Pregunta
If a project’s net present value is positive (negative), the project is generally acceptable (unacceptable).
Respuesta
- True
- False
Pregunta 30
Pregunta
A project’s net present value is a measure of a project’s contribution to firm value
Respuesta
- True
- False
Pregunta 31
Pregunta
A capital budgeting project’s internal rate of return is the rate of return causing a project’s net present value to equal the net investment.
Respuesta
- True
- False
Pregunta 32
Pregunta
If a project’s internal rate of return is greater (less) than the required rate of return, the project is generally acceptable (unacceptable).
Respuesta
- True
- False
Pregunta 33
Pregunta
If a capital budgeting project’s cash flows are not normal, the internal rate of return method should be used to make the investment decision
Respuesta
- True
- False
Pregunta 34
Pregunta
The net present value, profitability index, internal rate of return, and modified internal rate of return methods will provide consistent investment decisions for independent projects with normal cash flows
Respuesta
- True
- False
Pregunta 35
Pregunta
Capital budgeting decisions are based upon cost-benefit analysis. A project’s net investment is compared to the project’s net cash flows in order to make a decision.
Respuesta
- True
- False
Pregunta 36
Pregunta
The purpose for capital budgeting projects are
Respuesta
-
To grow
-
Reduce costs
-
Replace Assets
-
Meet legal requirements
Pregunta 37
Pregunta
When making a capital budgeting decision, cash flows should be estimated on an incremental basis, not a total basis.
Respuesta
- True
- False
Pregunta 38
Pregunta
A capital budgeting project’s sunk costs and opportunity costs are both relevant to the project investment decision.
Respuesta
- True
- False
Pregunta 39
Pregunta
A project’s net cash flows are typically cash inflows whereas a project’s net investment is typically a cash outflow.
Respuesta
- True
- False
Pregunta 40
Pregunta
If a depreciable asset is sold for less than its book value, then taxes must be paid on the difference
Respuesta
- True
- False
Pregunta 41
Pregunta
The estimation of a project’s net cash flows (NCF) should not include changes in
Respuesta
-
interest expense
-
depreciation.
-
sales revenue
-
cash operating costs
Pregunta 42
Pregunta
Your university is considering what to do with the current football stadium. They plan to invest to upgrade the current football stadium or invest to build a new one closer to campus. What kind of projects are these?
Respuesta
-
mutually exclusive projects
-
independent projects
-
contingent projects
Pregunta 43
Pregunta
Which of the following is a basic principle when estimating a project’s cash flows?
Respuesta
-
Only direct effects of a project should be included in cash flow calculations
-
cash flows should be measured on a pretax basis
-
Cash flows should be measured on an incremental basis.
-
Cash flows should ignore depreciation because it is a non-cash charge.
Pregunta 44
Pregunta
What impact will an increase in depreciation have upon a firm?
Respuesta
-
increase profit and increase cash flow
-
increase profit and decrease cash flow
-
decrease profit and increase cash flow
-
decrease profit and decrease cash flow
Pregunta 45
Pregunta
Which one of the following would not typically be considered a capital budgeting project for a restaurant?
Respuesta
-
buying toilet paper for both the ladies’ and men’s restrooms
-
renovating the ladies’ restroom
-
installing a new fire suppression and alarm system
-
buying a new dishwashing system
Pregunta 46
Pregunta
Tokyo Food Supplies Corporation is considering an expansion to a new market. Tokyo Food Supplies has already conducted and paid $35,000 for a marketing survey. The expansion will cost $400,000 for new assets, another $25,000 for shipping and delivery costs, and another $70,000 for installation costs. In addition, $150,000 in net working capital will be needed immediately. Compute the net investment.
Respuesta
-
680,000
-
495,000
-
550,000
-
645,000
Pregunta 47
Pregunta
Poon’s Noodle House is considering replacing their noodle-processing machine. The current machine was purchased 4 years ago at a total cost of $20,000. It is being depreciated straight-line to a zero value over 8 years. If Poon sells the noodle-processing machine for $6,000, what is the after-tax cash flow to Poon’s Noodle House? Use 40% for the effective tax rate.
Respuesta
-
7,600
-
8,400
-
24,00
-
3,600
Pregunta 48
Pregunta
Spencers Majestic Foods is considering the replacement of some old equipment. The new equipment will cost $300,000 including delivery and installation. The old equipment to be replaced has a book value of $100,000 and can be sold pre-tax for $120,000. If the firm’s effective tax rate is 40%, compute the net investment.
Respuesta
-
180,000
-
192,000
-
188,000
-
228,000
Pregunta 49
Pregunta
A project is expected to increase a firm’s sales revenue by $50,000 annually, increase it cash expenses by $20,000 annually, and increase its depreciation by $15,000 annually. Given this information, what is the project’s expected annual net cash flow? Use a 40% effective tax rate.
Respuesta
-
21,000
-
24,000
-
9,000
-
33,000
Pregunta 50
Pregunta
A project is expected to increase a firm’s sales revenue by $12,000 annually, decrease it cash expenses by $18,000 annually, and increase its depreciation by $10,000 annually. Given this information, what is the project’s expected annual net cash flow? Use a 40% effective tax rate.
Respuesta
-
22,000
-
400
-
12,000
-
18,000
Pregunta 51
Pregunta
The discounted payback period does not take into account the time value of money
Respuesta
- True
- False
Pregunta 52
Pregunta
A project’s payback period is the amount of time required for the project’s net cash flows to recover or pay back the net investment.
Respuesta
- True
- False
Pregunta 53
Pregunta
If a project’s net present value is positive (negative), the project is generally acceptable (unacceptable).
Respuesta
- True
- False
Pregunta 54
Pregunta
A project’s net present value is a measure of a project’s contribution to firm value
Respuesta
- True
- False
Pregunta 55
Pregunta
If a project’s internal rate of return is greater (less) than the required rate of return, the project is generally acceptable (unacceptable).
Respuesta
- True
- False
Pregunta 56
Pregunta
Which one of the following capital budgeting decision methods measures how long it takes for a project’s benefits to recover the project’s cost?
Respuesta
-
MIRR
-
net present value
-
payback period
-
profitability index
Pregunta 57
Pregunta
The payback period is a useful measure of a project’s
Respuesta
-
profitability
-
rate of return
-
economic life
-
liquidity risk
Pregunta 58
Pregunta
What is the profitability index for an acceptable capital budgeting project?
Respuesta
-
greater than 1
-
less than 1
-
greater than 0
-
less than 9
Pregunta 59
Pregunta
Which of the following is true for 5-year project with a 3-year payback period?
Respuesta
-
The net present value is zero.
-
The net present value is positive.
-
The net present value is negative.
-
Not enough information
Pregunta 60
Pregunta
Which of the following is true about the net present value method?
Respuesta
-
It is the best single measure of a project’s liquidity risk.
-
It is not a good measure of a project’s profitability.
-
It is the best single measure of a project’s profitability.
-
It is the best single measure of a project’s overall risk.
Pregunta 61
Pregunta
A capital budgeting project has a net investment of $450,000 and is expected to generate net cash flows of $150,000 annually for 5 years. What is the net present value at a 15% required rate of return?
Respuesta
-
52,823
-
41,144
-
300,000
-
64,962
Pregunta 62
Pregunta
A capital budgeting project has a net investment of $1,000,000 and is expected to generate net cash flows of $350,000 annually for 4 years. What is the internal rate of return?
Respuesta
-
2.48%
-
22.11%
-
26.43%
-
14.96%
Pregunta 63
Pregunta
A capital budgeting project is expected to have the following cash flows:
Year Cash Flows
0 −$850,000
1 $300,000
2 $400,000
3 $500,000
What is the project’s payback period?
Respuesta
-
1.5 yrs
-
2.3 yrs
-
2.5 yrs
-
3.3 yrs
Pregunta 64
Pregunta
A capital budgeting project is expected to have the following cash flows:
Year Cash Flows
0 −$850,000
1 $300,000
2 $400,000
3 $500,000
What is the project’s net present value at an 18% required rate of return?
Respuesta
-
-4,173.50
-
-18,725.33
-
10,800.96
-
350,000.00
Pregunta 65
Pregunta
A capital budgeting project is expected to have the following cash flows:
Year Cash Flows
0 -$1,000,000
1 $400,000
2 $500,000
3 $700,000
What is the project’s internal rate of return?
Respuesta
-
27.95%
-
30.88%
-
21.65%
-
24.90%
Pregunta 66
Pregunta
Which of these measures profitability of a project
Respuesta
-
payback period
-
discounted payback period
-
NPV
-
PI
-
IRR
-
MIRR
Pregunta 67
Pregunta
Which of these measures risk and liquidity of a project
Respuesta
-
payback period
-
discounted payback period
-
NPV
-
PI
-
IRR
-
MIRR
Pregunta 68
Pregunta
Which is the best indicator for profitability
Respuesta
-
MIRR
-
PI
-
NPV
-
Discounted payback period
Pregunta 69
Pregunta
Which is the best indicator for liquidity and risk
Respuesta
-
NPV
-
discounted payback period
-
PI
-
MIRR
Pregunta 70
Pregunta
Which is the best indicator for margin for safety
Respuesta
-
IRR
-
MIRR
-
NPV
-
PI
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