Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1. The mix of debt, preferred stock, and common equity with which the firm plans to raise capital is called the: a) Financial risk b) Operating leverage c) Business risk d) Target business structure

2. The extent to which fixed costs are used in a firm's operations is called its:
a) Financial leverage b) Operating leverage c) Total leverage d) Foreign risk exposure

3. As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS. a) True b) False

4. In general, an increase in the corporate tax rate would cause firms to use less debt in their capital structures. a) True b) False

5. Suppose you know that your firm is facing relatively poor prospects but needs new capital. If you also know that investors do not have this information, signaling theory would predict that you would:
a) Issue debt to maintain the returns of equity holders.
b) Issue equity to share the burden of decreased equity returns between old and new shareholders.
c) Both A and B

6. The ability to borrow money at a reasonable cost when good investment opportunities arise is called:
a) Symmetric information b) Asymmetric information (c) Capital structure d) Reserve borrowing capacity

7. Texas Products Inc. has a division that makes plastic composite bags for the space industry. The division has fixed costs of $45,000 per month, and it expects to sell 45,000 bags per month. If the variable cost per bag is $6.00, what price must the division charge in order to break even?
a) $6.00 b) $7.00 c) $8.00 d) $9.00

8. Chip Motors has $20 million in assets, which are financed with $4 million of debt and $16 million of equity. If Chip's beta is currently 2.4 and its tax rate is 40 percent, what is its unlevered beta?
a) 1.503 b) 1.934 c) 2.087 d) 2.400

9. The Free Indeed Company manufactures ladies shoes that are sold through discount houses. The shoes are sold for $20 each pair; the fixed costs are $110,000 for up to 30,000 pairs of shoes; variable costs are $13 per pair of shoes. What is the firm's breakeven point in units sold?
a) 30,000 pairs of shoes b) 15,714 pairs of shoes c) 8,462 pairs of shoes d) 5,500 pairs of shoes

10. The term "capital structure" refers to:
a) Long-term debt, preferred stock, and common stock equity. b) Current asset and current liabilities
c) Total assets minus liabilities d) Shareholders' equity

11. When sequential long-term financing is involved, the choice of debt or equity influences the future financial ------------------- of the firm.
a) Timing b) Flexibility c) Liquidity d) Solidarity

12. The traditional approach towards the valuation of a company assumes:
a) That the overall capitalization rate holds constant with changes in financial leverage.
b) That there is an optimum capital structure.
c) That total risk is not altered by changes in the capital structure.
d) That markets are perfect.

13. The cost of monitoring management is considered to be a (an):
a) Bankruptcy cost. b) Transaction cost. c) Agency cost d) Institutional cost

14. The cost of capital for a firm, when we allow for taxes, bankruptcy, and agency costs:
a. Remains constant with increasing levels of financial leverage.
b. First declines and then ultimately rises with increasing levels of financial leverage.
c. Increases with increasing levels of financial leverage.
d. Decreases with increasing levels of financial leverage.

15. The amount of stock that can be sold by a corporation without shareholder approval is limited to the number of: a) preferred shares b) Treasury shares c) Undistributed shares d) None of the above

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M924016

Have any Question? 


Related Questions in Basic Finance

Suppose you think msft stock is going to appreciate

Suppose you think MSFT stock is going to appreciate substantially in the next yr. The stock's current price is $100and call options expiring in 1 yr has an exercise price of $100 and is selling for $5. With $1,000 to inv ...

Compute the intrinsic values time values and lower bounds

Compute the intrinsic values, time values, and lower bounds of the following puts. Identify any profit opportunities that may exist. Treat these as American options for purposes of determining the intrinsic values and ti ...

The following is an excerpt taken from a november 30 2007

The following is an excerpt taken from a November 30, 2007, speech entitled "Innovation, Information, and Regulation in Financial Markets" by Federal Reserve Governor Randall S. Kroszner (www. federalreserve.gov/newseven ...

1 develop a topic of interest to you and prepare both a

1. Develop a topic of interest to you, and prepare both a structured and an unstructured interview. Collect data from your classmates, and develop a method for coding the findings. 2. Create a sampling frame, and collect ...

For each of the following scenarios identify which sampling

For each of the following scenarios, identify which sampling method is used: a. The State College is conducting a survey of student attitudes and opinions. The plan is to use the list of all registered students and rando ...

1nbspcalculate the cost of new common equity financing of

1. Calculate the cost of new common equity financing of stock R using Gordon Model Round the answers to two decimal places in percentage form (Write the percentage sign in the "units" box) Last Year Dividend Growth Rate ...

1 discuss the major supply chain aps applications with

1. Discuss the major supply chain APS applications with particular focus on the role and anticipated benefits for each application. 2. Discuss overall information flow and the major role of each APS system component. 3. ...

1 how can strategic procurement contribute to the quality

1. How can strategic procurement contribute to the quality of products produced by a manufacturing organization? 2. Explain the rationale underlying volume consolidation. What are the risks associated with using a single ...

1 what factors should an investor consider when trying to

1. What factors should an investor consider when trying to decide whether to dispose of a property that he has owned for several years? 2. What causes the marginal rate of return to change over time? How can the marginal ...

How do you explain the highly politicized nature of share

How do you explain the highly politicized nature of share issue privatization (SIP) pricing and share allocation policies? Are governments maximizing offering proceeds, or are they pursuing primarily political and econom ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro