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

Class investmentstopic term structure of interest rates

CLASS: Investments TOPIC : Term Structure of Interest Rates: Expectations Theory: Forward and SpotRates. QUESTION: Given the yield on a 7 year zero-coupon bond is 7%, yield on a 2 year strip is 5%, and forward two-year r ...

1 how do the industrial patterns observed for dividend

1. How do the industrial patterns observed for dividend payouts compare with the patterns observed for capital structures? For example, are industries characterized by high dividend payouts also characterized by high lev ...

Lauren has worked for a company with a retirement program

Lauren has worked for a company with a retirement program, and today is retiring from her job with the amount of $125000 in her retirement account. She decides to withdraw an equal amount from this account, once a year, ...

1 what are the advantages and disadvantages of usinga

1. What are the advantages and disadvantages of using (a) figures, (b) tables, and (c) text to report the results of experiments in the research report? 2. Differentiate between random sampling and random assignment. Whi ...

1 compare and contrast reactive and proactive consolidation

1. Compare and contrast reactive and proactive consolidation. Provide an example of each. 2. Four aspects of transportation operations management were identified as: (1) equipment scheduling, (2) load planning, (3) routi ...

Suppose that daimler ag which manufacturers mercedes-benz

Suppose that Daimler AG, which manufacturers Mercedes-Benz automobiles, sells 5 million worth of automobiles to U.S. importers. If the current exchange rate is $1.22 = 1, and Daimler agrees to accept payment of $6.1 mill ...

Consider the context-free grammara give a leftmost

Consider the context-free grammar: a) Give a leftmost derivation for the string. b) Give a rightmost derivation for the string. c) Give a parse tree for the string. ! d) Is the grammar ambiguous or unambiguous? Justify y ...

Answer the following questions as they relate to implied

Answer the following questions as they relate to implied volatilities. a. Can implied volatilities be expected to vary for options on the same stock with the same exercise prices but different expirations? b. Can implied ...

1 is the use of single-case studies a new approach to

1. Is the use of single-case studies a new approach to research in psychology? Explain. 2. Why do single-case researchers believe that the data from individual participants should not be combined, as when we compute a gr ...

Question 1 diane carter is interested in buying a five-year

Question 1: Diane Carter is interested in buying a five-year zero coupon bond with a face value is $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen