13435599
Descrição
Quiz por Mitzel Montero, atualizado more than 1 year ago
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Criado por Mitzel Montero
mais de 6 anos atrás
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Questão 1
Questão
Taxes are a relevant cost that should be accounted for in the firm’s weighted average cost of capital.
Responda
- True
- False
Questão 2
Questão
Preferred stock has higher seniority than bonds and common stock
Responda
- True
- False
Questão 3
Questão
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
Responda
- True
- False
Questão 4
Questão
The weights in a firm’s weighted average cost of capital should be a measure of the firm’s target capital structure
Responda
- True
- False
Questão 5
Questão
Issuance or flotation costs are the costs investors pay to brokers when they purchase common stock
Responda
- True
- False
Questão 6
Questão
Which of the following is typically not treated as one of the components of capital in cost of capital schedule calculations
Responda
-
common equity
-
long term debt
-
preferred stock
-
short term debt
Questão 7
Questão
A firm's weighed average cost of capital is based on investors required rates of return on a firms securities and target capital structure
Responda
- True
- False
Questão 8
Questão
Cost of capital is concerned with the cost of
Responda
-
short term sources of funds
-
long term sources of funds
Questão 9
Questão
Issuance costs cause the cost of funds from securities to be lower than the investor return
Responda
- True
- False
Questão 10
Questão
_______ is the firms minimum required rate of return on investments
Responda
-
target capital structure
-
weighted average cost of capital
-
cost of capital
Questão 11
Questão
Which has the highest seniority
Responda
-
common stock
-
bonds
-
preferred stock
Questão 12
Questão
Which is the riskiest corporate security
Responda
-
bonds
-
common stock
-
preferred stock
Questão 13
Questão
Funds come from outside the firm
Responda
-
Internal Equity
-
External Equity
Questão 14
Questão
The firm reinvests profits and provides funds internally
Responda
-
internal equity
-
external equity
Questão 15
Questão
Why is external common equity capital more expensive then internal common equity capital
Responda
-
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
Questão 16
Questão
__________ represents the long-term or permanent sources of the firm’s financing
Responda
-
Equity structure
-
Financial Structure
-
Leverage Structure
-
Capital Structure
Questão 17
Questão
Which model is typically used to estimate the cost of using external equity capital
Responda
-
arbitrage pricing theory model
-
rate of return on perpetuity model
-
dividend valuation model
-
capital asset pricing model
Questão 18
Questão
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?
Responda
-
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
Questão 19
Questão
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%?
Responda
-
9.36%
-
5.61%
-
9.28%
-
5.57%
Questão 20
Questão
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?
Responda
-
9.48%
-
8.76%
-
8.72%
-
8.00%
Questão 21
Questão
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?
Responda
-
13.10%
-
12.80%
-
14.00%
-
5.48%
Questão 22
Questão
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?
Responda
-
12.11%
-
20.59%
-
10.00%
-
14.00%
Questão 23
Questão
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?
Responda
-
11.35%
-
9.45%
-
12.15%
-
10.67%
Questão 24
Questão
Which model(s) is used to estimate the cost of using internal equity?
Responda
-
Capital Asset Pricing Model
-
Dividend Valuation Model
-
Bond yield plus risk premium
Questão 25
Questão
The discounted payback period does not take into account the time value of money
Responda
- True
- False
Questão 26
Questão
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
Responda
- True
- False
Questão 27
Questão
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
Responda
- True
- False
Questão 28
Questão
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
Responda
- True
- False
Questão 29
Questão
If a project’s net present value is positive (negative), the project is generally acceptable (unacceptable).
Responda
- True
- False
Questão 30
Questão
A project’s net present value is a measure of a project’s contribution to firm value
Responda
- True
- False
Questão 31
Questão
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.
Responda
- True
- False
Questão 32
Questão
If a project’s internal rate of return is greater (less) than the required rate of return, the project is generally acceptable (unacceptable).
Responda
- True
- False
Questão 33
Questão
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
Responda
- True
- False
Questão 34
Questão
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
Responda
- True
- False
Questão 35
Questão
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.
Responda
- True
- False
Questão 36
Questão
The purpose for capital budgeting projects are
Responda
-
To grow
-
Reduce costs
-
Replace Assets
-
Meet legal requirements
Questão 37
Questão
When making a capital budgeting decision, cash flows should be estimated on an incremental basis, not a total basis.
Responda
- True
- False
Questão 38
Questão
A capital budgeting project’s sunk costs and opportunity costs are both relevant to the project investment decision.
Responda
- True
- False
Questão 39
Questão
A project’s net cash flows are typically cash inflows whereas a project’s net investment is typically a cash outflow.
Responda
- True
- False
Questão 40
Questão
If a depreciable asset is sold for less than its book value, then taxes must be paid on the difference
Responda
- True
- False
Questão 41
Questão
The estimation of a project’s net cash flows (NCF) should not include changes in
Responda
-
interest expense
-
depreciation.
-
sales revenue
-
cash operating costs
Questão 42
Questão
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?
Responda
-
mutually exclusive projects
-
independent projects
-
contingent projects
Questão 43
Questão
Which of the following is a basic principle when estimating a project’s cash flows?
Responda
-
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.
Questão 44
Questão
What impact will an increase in depreciation have upon a firm?
Responda
-
increase profit and increase cash flow
-
increase profit and decrease cash flow
-
decrease profit and increase cash flow
-
decrease profit and decrease cash flow
Questão 45
Questão
Which one of the following would not typically be considered a capital budgeting project for a restaurant?
Responda
-
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
Questão 46
Questão
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.
Responda
-
680,000
-
495,000
-
550,000
-
645,000
Questão 47
Questão
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.
Responda
-
7,600
-
8,400
-
24,00
-
3,600
Questão 48
Questão
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.
Responda
-
180,000
-
192,000
-
188,000
-
228,000
Questão 49
Questão
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.
Responda
-
21,000
-
24,000
-
9,000
-
33,000
Questão 50
Questão
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.
Responda
-
22,000
-
400
-
12,000
-
18,000
Questão 51
Questão
The discounted payback period does not take into account the time value of money
Responda
- True
- False
Questão 52
Questão
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.
Responda
- True
- False
Questão 53
Questão
If a project’s net present value is positive (negative), the project is generally acceptable (unacceptable).
Responda
- True
- False
Questão 54
Questão
A project’s net present value is a measure of a project’s contribution to firm value
Responda
- True
- False
Questão 55
Questão
If a project’s internal rate of return is greater (less) than the required rate of return, the project is generally acceptable (unacceptable).
Responda
- True
- False
Questão 56
Questão
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?
Responda
-
MIRR
-
net present value
-
payback period
-
profitability index
Questão 57
Questão
The payback period is a useful measure of a project’s
Responda
-
profitability
-
rate of return
-
economic life
-
liquidity risk
Questão 58
Questão
What is the profitability index for an acceptable capital budgeting project?
Responda
-
greater than 1
-
less than 1
-
greater than 0
-
less than 9
Questão 59
Questão
Which of the following is true for 5-year project with a 3-year payback period?
Responda
-
The net present value is zero.
-
The net present value is positive.
-
The net present value is negative.
-
Not enough information
Questão 60
Questão
Which of the following is true about the net present value method?
Responda
-
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.
Questão 61
Questão
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?
Responda
-
52,823
-
41,144
-
300,000
-
64,962
Questão 62
Questão
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?
Responda
-
2.48%
-
22.11%
-
26.43%
-
14.96%
Questão 63
Questão
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?
Responda
-
1.5 yrs
-
2.3 yrs
-
2.5 yrs
-
3.3 yrs
Questão 64
Questão
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?
Responda
-
-4,173.50
-
-18,725.33
-
10,800.96
-
350,000.00
Questão 65
Questão
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?
Responda
-
27.95%
-
30.88%
-
21.65%
-
24.90%
Questão 66
Questão
Which of these measures profitability of a project
Responda
-
payback period
-
discounted payback period
-
NPV
-
PI
-
IRR
-
MIRR
Questão 67
Questão
Which of these measures risk and liquidity of a project
Responda
-
payback period
-
discounted payback period
-
NPV
-
PI
-
IRR
-
MIRR
Questão 68
Questão
Which is the best indicator for profitability
Responda
-
MIRR
-
PI
-
NPV
-
Discounted payback period
Questão 69
Questão
Which is the best indicator for liquidity and risk
Responda
-
NPV
-
discounted payback period
-
PI
-
MIRR
Questão 70
Questão
Which is the best indicator for margin for safety
Responda
-
IRR
-
MIRR
-
NPV
-
PI
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