Principles Of Managerial Finance 14th Edition

ISBN 13

978-0133507690

ISBN 10

0133507696

Authors

Chad J. Zutter, Lawrence J. Gitman

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169 documents found.

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978-0133507690 Chapter 1 Solution Manual

Part 1 Introduction to Managerial Finance Chapters in This Part Chapter 1 The Role of Managerial Finance Chapter 2 The Financial Market Environment Integrative Case 1: Merit Enterprise Corp. 2015 Pearson Education, Inc. Chapter 1 The Role of Managerial Finance Instructors Resources Overview This chapter introduces the students to the field of finance and explores career

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978-0133507690 Chapter 10 Solution Manual Part 1

Part 5 Long-Term Investment Decisions Chapters in This Part Chapter 10 Capital Budgeting Techniques Chapter 11 Capital Budgeting Cash Flows Chapter 12 Risk and Refinements in Capital Budgeting Integrative Case 5: Lasting Impressions Company Chapter 10 Capital Budgeting Techniques nInstructors Resources Overview This chapter is the first of three that deal with long-term investment decisions. This chapter

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978-0133507690 Chapter 10 Solution Manual Part 2

P10-10. NPVmutually exclusive projects LG 3; Intermediate a. and b. Press A CF0 $85,000; CF1 $18,000; F1 8 Set I 15%Solve for NPV $4,228.21RejectPress BCF0 $60,000; CF1 $12,000; CF2 $14,000; CF3 $16,000; CF4 $18,000; CF5 $20,000; CF6 $25,000 Set I 15%Solve for NPV $2,584.34AcceptPress CCF0 $130,000; CF1 $50,000; CF2 $30,000; CF3 $20,000; CF4

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978-0133507690 Chapter 10 Solution Manual Part 3

Project B CF0 $85,000; CF1 $40,000; CF2 $35,000; CF3 $30,000 CF4 $10,000; CF5 $5,000 Set I 12%NPVB $9,161.79 Based on the NPV, the project is acceptable because the NPV is greater than zero.Solve for IRRB 17.75%Based on the IRR, the project is acceptable because the IRR of 17.75% is greater than

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978-0133507690 Chapter 11 Solution Manual Part 1

Chapter 11 Capital Budgeting Cash Flows Instructors Resources Overview This chapter expands upon the capital budgeting techniques presented in the last chapter (Chapter 10). Shareholder wealth maximization relies upon selection of projects that have positive net present values. The most important and difficult aspect of the capital budgeting process is developing good estimates of

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978-0133507690 Chapter 11 Solution Manual Part 2

P11-15. Depreciation LG 5; Basic Depreciation Schedule Year Depreciation Expense 1 $68,000 0.20 $13,600 2 68,000 0.32 21,760 3 68,000 0.19 12,920 4 68,000 0.12 8,160 5 68,000 0.12 8,160 6 68,000 0.05 3,400 2 68,000 0.32 21,760 3 68,000 0.19 12,920 4 68,000 0.12 8,160 5 68,000 0.12 8,160 6 68,000 0.05 3,400

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978-0133507690 Chapter 11 Solution Manual Part 3

P11-27. Integrativedetermining relevant cash flows LG 3, 4, 5, 6; Challenge a. Initial Investment A B Installed cost of new asset Cost of new asset$ 40,000 $ 54,000 Installation costs 8,000 6,000 Total proceeds, sale of new asset 48,000 60,000 After-tax proceeds from sale of old asset Proceeds from sale of old asset (18,000) (18,000)

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978-0133507690 Chapter 12 Solution Manual Part 1

Chapter 12 Risk and Refinements in Capital Budgeting Instructors Resources Overview Chapters 10 and 11 developed the major decision-making aspects of capital budgeting. Cash flows and budgeting models have been integrated and discussed in providing the principles of capital budgeting. However, there are more complex issues beyond those presented. Chapter 12 expands capital

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978-0133507690 Chapter 12 Solution Manual Part 2

P12-12. Risk classes and RADR LG 4; Basic a. Project X CF0 $180,000, CF1 $80,000, CF2 $70,000, CF3 $60,000, CF4 $60,000, CF5 $60,000 Set I 22%Solve for NPV $14.930.45 CF0 $180,000, CF1 $80,000, CF2 $70,000, CF3 $60,000, CF4 $60,000, CF5 $60,000 Set I 22%Solve for NPV $14.930.45 CF0 $180,000, CF1 $80,000, CF2 $70,000, CF3

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978-0133507690 Chapter 13 Solution Manual Part 1

Chapter 13 Leverage and Capital Structure Instructors Resources Overview This chapter introduces the student to the concepts of operating and financial leverage and the associated business and financial risks. As a prerequisite to operating leverage, breakeven analysis is presented through graphic and algebraic methods. The limitations of breakeven analysis are also discussed. Financial

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978-0133507690 Chapter 13 Solution Manual Part 2

P13-6. Breakeven pointchanging costs/revenues LG 1; Intermediate a. Q F (P VC)Q $40,000 ($10 $8.00) 20,000 books b. Q $44,000 ($10 $8.00) 22,000 books c. Q $40,000 ($10.50 $8.00) 16,000 books d. Q $40,000 ($10 $8.50) 26,667 books e. The operating breakeven point is directly related to fixed and variable costs and

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978-0133507690 Chapter 13 Solution Manual Part 3

P13-23. EBIT-EPS and preferred stock LG 5: Intermediate a. Structure A Structure B EBIT $30,000 $50,000 $30,000 $50,000 Less: Interest 12,000 12,000 7,500 7,500 Net profits before taxes $18,000 $38,000 $22,500 $42,500 Less: Taxes 7,200 15,200 9,000 17,000 Net profit after taxes $10,800 $22,800 $13,500 $25,500 Less: Preferred dividends 1,800 1,800 2,700 2,700 Earnings available for common shareholders $ 9,000

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978-0133507690 Chapter 14 Solution Manual Part 1

Chapter 14 Payout Policy Instructors Resources Overview Chapter 14 concentrates on the payout decision from the viewpoint of both the firm and the investors. The types of payout policies, forms of dividends, and their possible effects on the value of the firm are included in this chapter. The arguments for the relevancy and

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978-0133507690 Chapter 14 Solution Manual Part 2

P14-13. Stock splitfirm LG 6; Intermediate a. CS $1,800,000 (1,200,000 shares @ $1.50 par) b. CS $1,800,000 (400,000 shares @ $4.50 par) c. CS $1,800,000 (1,800,000 shares @ $1.00 par) d. CS $1,800,000 (3,600,000 shares @ $0.50 par) e. CS $1,800,000 (150,000 shares @ $12.00 par) b. CS $1,800,000 (400,000 shares @

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978-0133507690 Chapter 15 Solution Manual Part 1

Part 7 Short-Term Financial Decisions Chapters in This Part Chapter 15 Working Capital and Current Assets Management Chapter 16 Current Liabilities Management Integrative Case 7: Casa de Diseo 2015 Pearson Education, Inc. Chapter 15 Working Capital and Current Assets Management Instructors Resources Overview This chapter introduces the fundamentals and describes the interrelationship of net working capital, profitability,

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978-0133507690 Chapter 15 Solution Manual Part 2

P15-3. Multiple changes in CCC LG 2; Intermediate a. AAI 365 6 times inventory 61 days OC AAI ACP 61 days 45 days 106 days CCC OC APP 106 days 30 days 76 days Daily financing $3,000,000 365$8,219 Resources needed Daily financing CCC$8,219 76 $624,644 OC AAI ACP 61 days 45 days

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978-0133507690 Chapter 16 Solution Manual Part 1

Chapter 16 Current Liabilities Management Instructors Resources Overview This chapter introduces the fundamentals and describes the interrelationship of net working capital, profitability, and risk in managing the firms current liability accounts. The management of current liabilities requires choosing appropriate levels of financing and involves tradeoffs between risk and profitability. This chapter also reviews

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978-0133507690 Chapter 16 Solution Manual Part 2

P16-15. Cost of commercial paper LG 4; Intermediate a. $1,000,000 $978,000 Effective 90-day rate = 2.25% $978,000 -= Effective annual rate (1 0.0225)365/90 1 9.44% b. Effective 90-day rate with transaction costs: [$1,000,000 $978,000 $9,612] [ $978,000 $9,612] $12,388 987,612 1.25% Effective annual rate (1 0.0125)365/90 1 5.17% [$1,000,000 $978,000 $9,612] [ $978,000 $9,612] $12,388 987,612 1.25% Effective annual

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978-0133507690 Chapter 17 Solution Manual Part 1

Part 8 Special Topics in Managerial Finance Chapters in This Part Chapter 17 Hybrid and Derivative Securities Chapter 18 Mergers, LBOs, Divestitures, and Business Failure Chapter 19 International Managerial Finance Integrative Case 8: Organic Solutions 2015 Pearson Education, Inc. Chapter 17 Hybrid and Derivative Securities Instructors Resources Overview This chapter focuses on other sources of long-term

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978-0133507690 Chapter 17 Solution Manual Part 2

P17-5. Lease versus purchase LG 2; Challenge a. Lease After-tax cash outflows $19,800 (1 0.40) $11,880/year for 5 years plus $24,000 purchase option in year 5 (total $35,880). After-tax cash outflows $19,800 (1 0.40) $11,880/year for 5 years plus $24,000 purchase option in year 5 (total $35,880). After-tax cash outflows $19,800 (1 0.40) $11,880/year

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978-0133507690 Chapter 18 Solution Manual Part 1

128Gitman/Zutter Principles of Managerial Finance, Fourteenth Edition Chapter 18 Mergers, LBOs, Divestitures, and Business Failure Instructors Resources Overview This chapter covers the fundamentals of mergers, leveraged buyouts (LBOs), and divestitures, as well as methods for reorganizing or liquidating a firm in the event of a business failure. The motives for and types of mergers,

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978-0133507690 Chapter 18 Solution Manual Part 2

P18-6. Personal finance: Divestitures LG 3; Easy Additional monthly gross incomeAdd: Employer-paid benefits$3,800 1,200Additional income and benefits $5,000Additional monthly federal and state income taxesAdd: Additional expenses related to Maggies job$1,300 1,400Additional taxes and expenses $2,700Net income (loss) $2,300Because the Smiths will increase their net income by $2,300 per month, having Maggie

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978-0133507690 Chapter 19 Solution Manual

Chapter 19 International Managerial Finance 145 Chapter 19 International Managerial Finance Instructors Resources Overview In todays global business environment, the financial manager must also be aware of the international aspects of finance. A variety of international finance topics are presented in this chapter, including taxes, accounting practices, risk, the international capital markets, and

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978-0133507690 Chapter 2 Solution Manual

Chapter 2 The Financial Market Environment Instructors Resources Overview Money and capital markets and their major components are introduced in this chapter. Firms need to raise capital in order to survive. Financial institutions give firms access to the money they need to grow. However, greed can drive financial managers and institutions to commit actions

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978-0133507690 Chapter 3 Solution Manual Part 1

Part 2 Financial Tools Chapters in This Part Chapter 3 Financial Statements and Ratio Analysis Chapter 4 Cash Flow and Financial Planning Chapter 5 Time Value of Money Integrative Case 2: Track Software, Inc. 2015 Pearson Education, Inc. Chapter 3 Financial Statements and Ratio Analysis Instructors Resources Overview This chapter examines four key components of the

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978-0133507690 Chapter 3 Solution Manual Part 2

P3-5. Calculation of EPS and retained earnings LG 1; Intermediate a. Earnings per share: Net profit before taxes $436,000 Less: Taxes at 40% 174,400 Net profit after tax $261,600 Less: Preferred stock dividends 64,000Earnings available to common stockholders $197,600Earning available to common stockholders $197,600Earnings per share $1.162Total shares outstanding 170,000= = =b. Amount to retained

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978-0133507690 Chapter 3 Solution Manual Part 3

P3-20. Common-size statement analysis LG 5; Intermediate Creek Enterprises Common-Size Income Statement for the Years Ended December 31, 2014 and 2015 2015 2014 Sales revenue 100.0% 100.0% Less: Cost of goods soldGross profits70.0%30.0%65.9%34.1%Less: Operating expenses:Selling 10.0% 12.7%General 6.0% 6.3%Lease expense 0.7% 0.6%Depreciation 3.3% 20.0 % 3.6 % 23.2%Operating profits 10.0% 10.9%Less: Interest expense 3.3 % 1.5%Net Profits

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978-0133507690 Chapter 4 Solution Manual Part 1

Chapter 4 Cash Flow and Financial Planning Instructors Resources Overview This chapter introduces the student to the financial planning process, with the emphasis on short-term (operating) financial planning and its two key components: cash planning and profit planning. Cash planning requires preparation of the cash budget, while profit planning involves preparation of a pro forma

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978-0133507690 Chapter 4 Solution Manual Part 2

P4-11. Cash budgetadvanced LG 4; Challenge a. Xenocore, Inc. ($000) Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. Forecast Sales $210 $25 0 $170 $160 $140 $180 $200 $250 Cash sales (0.20) $ 34 $ 32 $ 28 $ 36 $ 40 $ 50 CollectionsLag 1 month (0.40)100 68 64 56 72 80 Lag 2 months (0.40)84 100 68 64

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978-0133507690 Chapter 5 Solution Manual Part 1

Chapter 5 Time Value of Money Instructors Resources Overview This chapter introduces an important financial concept: the time value of money. The present value and future of a sum, as well as the present and future values of an annuity, are explained. Special applications of the concepts include intra-year compounding, mixed cash flow

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978-0133507690 Chapter 5 Solution Manual Part 2

P5-15. Personal finance: Time value and discount rates LG 2; Intermediate a. (1) N 10, I 6%, FV $1,000,000 (2) N 10, I 9%, FV $1,000,000 Solve for PV $558,394.78 Solve for PV $422,410.81 Solve for PV $558,394.78 Solve for PV $422,410.81 Solve for PV $558,394.78 Solve for PV $422,410.81 (3) N 10, I 12%, FV

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978-0133507690 Chapter 5 Solution Manual Part 3

P5-39. Personal finance: Compounding frequency and time value LG 5; Challenge a. (1) N 10; I 8%, PV $2,000 (2) N 20, I 4%, PV $2,000 Solve for FV $4,317.85 Solve for FV $4,382.25(3) N 3650; I 8 365 0.022, PV $2,000 (4) FV10 $2,000(e0.8) Solve for FV $4,450.69 Solve for FV $4,451.11 Solve

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978-0133507690 Chapter 6 Solution Manual Part 1

Part 3 Valuation of Securities Chapters in This Part Chapter 6 Interest Rates and Bond Valuation Chapter 7 Stock Valuation Integrative Case 3: Encore International 2015 Pearson Education, Inc. Chapter 6 Interest Rates and Bond Valuation Instructors Resources Overview This chapter begins with a thorough discussion of interest rates, yield curves, and their relationship to required

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978-0133507690 Chapter 6 Solution Manual Part 2

P6-7. Term structure of interest rates LG 1; Intermediate a. b. and c. Five years ago, the yield curve was relatively flat, reflecting expectations of stable interest rates. Two years ago, the yield curve was downward sloping, reflecting lower expected interest rates, which could be due to a decline in the expected level of

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978-0133507690 Chapter 7 Solution Manual Part 1

Chapter 7 Stock Valuation Instructors Resources Overview This chapter continues on the valuation process introduced in Chapter 6 for bonds. Models for valuing preferred and common stock are presented. For common stock, the zero growth, constant growth, and variable growth models are examined. The relationship between stock valuation and efficient markets is presented.

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978-0133507690 Chapter 7 Solution Manual Part 2

P7-13. Personal finance: Common stock valuevariable growth LG 4; Challenge P0 0 1 1 (1 ) (1 ) N t t ts D g r = + + 1 2 1 (1 ) ( ) N N s s D r r g + + - P0 PV of dividends during initial growth period PV of price of stock at end of growth period. Steps 1 and 2: Value of cash dividends and

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978-0133507690 Chapter 8 Solution Manual Part 1

Part 4 Risk and the Required Rate of Return Chapters in this Part Chapter 8 Risk and Return Chapter 9 The Cost of Capital Integrative Case 4: Eco Plastics Company 2015 Pearson Education, Inc. Chapter 8 Risk and Return Instructors Resources Overview This chapter focuses on the fundamentals of the risk and return relationship of assets

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978-0133507690 Chapter 8 Solution Manual Part 2

P8-10. Assessing return and risk LG 2; Challenge a. Project 257 (1) Range: 1.00 (.10) 1.10 (2) Expected return: =1 n i ri i r r P= Rate of Return ri Probability Pr i Weighted Value ri Pr i Expected Return 1= = n i ri i r r P .10 0.01 0.001 0.10 0.04 0.004 0.20 0.05 0.0100.30 0.10 0.0300.40 0.15 0.0600.45 0.30 0.1350.50 0.15 0.0750.60

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978-0133507690 Chapter 8 Solution Manual Part 3

P8-20. Interpreting beta LG 5; Basic Effect of change in market return on asset with beta of 1.20: a. 1.20 (15%) 18.0% increase b. 1.20 (8%) 9.6% decreasec. 1.20 (0%) no changed. The asset is more risky than the market portfolio, which has a beta of 1. The higher beta makes the return move

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978-0133507690 Chapter 9 Solution Manual Part 1

Chapter 9 The Cost of Capital Instructors Resources Overview This chapter introduces the student to an important financial concept, the cost of capital. The mechanics of computing the sources of capital debt, preferred stock, common stock, and retained earnings are reviewed. These individual costs are then combined into a weighted average cost of

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978-0133507690 Chapter 9 Solution Manual Part 2

P9-13. WACCbook weights LG 6; Basic a. Type of Capital Book Value Weight Cost Weighted Cost Long-term debt $700,000 0.500 5.3% 2.650% Preferred stock 50,000 0.036 12.0% 0.432%Common stock 650,000 0.464 16.0% 7.424%$1,400,000 1.000 10.506% Preferred stock 50,000 0.036 12.0% 0.432%Common stock 650,000 0.464 16.0% 7.424%$1,400,000 1.000 10.506% Preferred stock 50,000 0.036 12.0% 0.432% Common stock 650,000 0.464

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FC 182

1) Efficient-market hypothesis is the theory describing the behavior of an assumed "perfect" market in which securities are typically in equilibrium, security prices fully reflect all public information available and react swiftly to new information, and, because stocks are fairly priced, investors need not waste time looking for mispriced securities. Answer:

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FC 184 Homework

1) One basic weakness of the simplified pro forma approaches lies in the assumption that the firm's past financial condition is an accurate indicator of its future. Answer: TRUE Answer: TRUE Answer: TRUE 2) When considering a firm's financial decision alternative, financial managers should accept only those actions that are expected to maximize shareholder

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FC 213 Midterm

1) A firm may face increase in the weighted average cost of capital either when retained earnings have been exhausted or due to increases in debt, preferred stock, and common equity costs as additional new funds are required. Answer: TRUE Answer: TRUE Answer: TRUE 2) In the development of pro forma statements, a firm that

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FC 245 Test 2

1) In the statement of cash flows, the cash flows from financing activities result from debt and equity financing transactions; including incurrence and repayment of debt, cash inflow from the sale of stock, and cash outflows to repurchase stock or pay cash dividends. Answer: TRUE Answer: TRUE Answer: TRUE 2) When a firm has

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FC 251 1 The Use Of The Unaudited

1) The use of the unaudited financial statements for ratio analysis is preferable because it reflects the firm's true financial condition. Answer: FALSE Answer: FALSE Answer: FALSE 2) An internal sales forecast is based on the relationships that can be observed between a firm's sales and certain key economic indicators such as the gross

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FC 268 Quiz 3

1) Commercial paper is a form of financing that consists of short-term, secured promissory notes issued by firms with a high credit standing. Answer: FALSE Answer: FALSE Answer: FALSE 2) Real options are opportunities that are embedded in capital budgeting projects that enable managers to alter their cash flows and risks in a way

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FC 280

1) The average investment of a firm in accounts receivable is equal to the firm's total variable cost of annual sales divided by its average collection period. Answer: FALSE Answer: FALSE Answer: FALSE 2) The amount of preferred stock dividends that must be paid each year may be stated in dollars or as a percentage

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FC 289

1) If a firm anticipates stretching accounts payable, its cost of giving up a cash discount is reduced. Answer: TRUE Answer: TRUE Answer: TRUE 2) One of the major reasons for attaching a stock purchase warrant is that investors do not require the issuing firm to pay an interest rate as high as on

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FC 303 Quiz 3

1) The market rewards firms that adopt a fixed or increasing level of dividends rather than a fixed dividend payout policy through higher share prices. Answer: TRUE Answer: TRUE Answer: TRUE 2) In theory, the rate of return on U.S. Treasury bills should always exceed the rate of inflation as measured by the consumer

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FC 307

1) Economic exposure is the risk resulting from the effects of changes in foreign exchange rates on a firm's value. Answer: TRUE Answer: TRUE Answer: TRUE 2) The constant growth model is an approach to dividend valuation that assumes a constant future dividend. Answer: FALSE Answer: FALSE Answer: FALSE 3) The two basic measures of liquidity are the

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FC 383 Midterm 2

1) The cost of preferred stock is the ratio of the preferred stock dividend to a firm's net proceeds from the sale of the preferred stock. Answer: TRUE Answer: TRUE Answer: TRUE 2) A takeover target's management will not support a proposed takeover due to a very high tender offer. Answer: FALSE Answer: FALSE Answer: FALSE 3) If

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FC 385 Test 1

1) Generally, the greater a firm's times interest earned ratio, the less able it is to meet payments as they come due. Answer: FALSE Answer: FALSE Answer: FALSE 2) In computing the weighted average cost of capital, from a strictly theoretical point of view, the preferred weighing scheme is target market value proportions. Answer: TRUE Answer: TRUE Answer:

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FC 397 1 A Portfolio That Combines

1) A portfolio that combines two assets having perfectly positive correlation returns cannot reduce the portfolio's overall risk below the risk of the least risky asset. Answer: TRUE Answer: TRUE Answer: TRUE 2) An inverted yield curve is a downward-sloping yield curve that indicates that short-term interest rates are generally higher than long-term interest

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FC 430 Quiz 3

1) The net fixed asset investment (NFAI) is defined as the change in net fixed assets plus depreciation. Answer: TRUE Answer: TRUE Answer: TRUE 2) While an earnings requirement limiting the amount of dividends paid is sometimes imposed, a firm is not prohibited from paying more in dividends than its current earnings. Answer: TRUE Answer: TRUE Answer:

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FC 456

1) An action on the part of a firm that increases the level of expected cash flows without a corresponding increase in risk should reduce share value; an action that reduces the level of expected cash flows without a corresponding decline in risk should increase share value. Answer: FALSE Answer: FALSE Answer: FALSE 2) Factoring

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FC 462 Midterm 1

1) Since lenders are generally reluctant to grant loans to a firm to pay dividends, the firm's ability to pay cash dividends is generally constrained by the amount of excess cash available. Answer: TRUE Answer: TRUE Answer: TRUE 2) In capital budgeting, risk refers to a high degree of variability of the initial investment

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FC 473

1) One of the key inputs to the final credit decision is a credit analyst's subjective judgment of a firm's creditworthiness since it can provide a better feel of a firm's operation than any quantitative figures. Answer: FALSE Answer: FALSE Answer: FALSE 2) The market segmentation theory suggests that the shape of the yield

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FC 534 Midterm 2

1) Cash budgets and pro forma statements are useful not only for internal financial planning but also are routinely required by the Internal Revenue Service (IRS). Answer: FALSE Answer: FALSE Answer: FALSE 2) If a firm is subject to capital rationing, it is able to accept all independent projects that provide an acceptable return. Answer:

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FC 544 Final

1) Holding all other factors constant, a firm that is subject to a greater level of business risk should employ more total leverage than an otherwise equivalent firm that is subject to a lesser level of business risk. Answer: FALSE Answer: FALSE Answer: FALSE 2) The effective interest rate for a discount loan is greater

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FC 570 Midterm 2

1) When computing an interest or growth rate, the rate will increase with an increase in future value, holding present value and the number of periods constant. Answer: TRUE Answer: TRUE Answer: TRUE 2) One aspect of risk associated with the aggressive strategy's maximum use of short-term financing is the fact that changing short-term

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FC 593 Test 2

1) The acceptance of a particular project usually has no impact on a firm's overall risk. Answer: FALSE Answer: FALSE Answer: FALSE 2) A financial manager's primary activities include making investment and financing decisions. Answer: TRUE Answer: TRUE Answer: TRUE 3) Factoring accounts receivable is relatively an inexpensive source of unsecured short-term funds that allows firms to turn

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FC 647

1) Asymmetric information results when managers of a firm have more information about the firm's operations and future prospects than investors have. Answer: TRUE Answer: TRUE Answer: TRUE 2) The cost of new common stock is normally greater than any other long-term financing cost. Answer: TRUE Answer: TRUE Answer: TRUE 3) The major attraction of a line of

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FC 647 Final

1) Independent projects are those whose cash flows are unrelated to one another; the acceptance of one does not eliminate the others from further consideration. Answer: TRUE Answer: TRUE Answer: TRUE 2) For calculating payback period for an annuity, all cash flows must be adjusted for time value of money. Answer: FALSE Answer: FALSE Answer: FALSE 3) Receipts

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FC 650 Quiz

1) Profitability ratios capture both risk and return. Answer: FALSE Answer: FALSE Answer: FALSE 2) Mercosur is a major South American trading bloc that includes countries that account for more than half of the total of Latin America's GDP. Answer: TRUE Answer: TRUE Answer: TRUE 3) Average age of inventory can be calculated as inventory turnover divided by 365. Answer:

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FC 688 Quiz 2

1) Operating-change restrictions gives the bank a right to revoke the line of credit if any major changes occur in a firm's financial condition or operations. Answer: TRUE Answer: TRUE Answer: TRUE 2) The various causes that increase the chances of business failures are current ratio of 1.33, solvency ratio of greater than 20%, and

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FC 712 Homework

1) The U.S. approaches used in hostile takeovers is an effective method of changing corporate control and used in many areas of the world including China and Japan. Answer: FALSE Answer: FALSE Answer: FALSE 2) Preferred stockholders must receive their stated dividends prior to the distribution of any earnings to common stockholders and bondholders. Answer:

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FC 816

1) The spot exchange rate is the rate of exchange between two currencies at some specified future date. Answer: FALSE Answer: FALSE Answer: FALSE 2) A single key ratio of a firm provides all the information required to judge the overall performance of the firm. Answer: FALSE Answer: FALSE Answer: FALSE 3) By measuring how quickly a firm

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FC 859 Midterm

1) Financial breakeven point represents the level of earnings after interest and taxes necessary for a firm to cover its fixed operating and financial changesthat is, the point at which dividends per share is equal to zero. Answer: FALSE Answer: FALSE Answer: FALSE 2) In exchange for the tailor-made maturity date provided by the

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FC 866 Test

1) Treasury stock generally does not have voting rights, does not earn dividends, and does not have a claim on assets in liquidation. Answer: TRUE Answer: TRUE Answer: TRUE 2) The cost of capital is the rate of return a firm must earn on investments in order to increase the firm's value. Answer: TRUE Answer: TRUE Answer:

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FE 103

1) The conversion ratio can be obtained by dividing the par value of the convertible by the conversion price. Answer: TRUE Answer: TRUE Answer: TRUE 2) For a risk-averse manager, required return would decrease for an increase in risk. Answer: FALSE Answer: FALSE Answer: FALSE 3) A bond issued by an American company that is denominated in Swiss

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Exam Prep

FE 138 Test

1) Leasing allows the lessee, in effect, to depreciate land, which is prohibited if the land were purchased. Answer: TRUE Answer: TRUE Answer: TRUE 2) Under a line of credit agreement, a bank may retain the right to revoke the line if any major changes occur in the firm's financial condition or operations. Answer: TRUE Answer: TRUE Answer: TRUE 3)

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FE 178 Quiz 1

1) The nominal rate of interest is the actual rate of interest charged by the supplier of funds and paid by demander. Answer: TRUE Answer: TRUE Answer: TRUE 2) Yield to maturity (YTM) is the rate investors earn if they buy the bond at a specific price and hold it until maturity. Answer: TRUE Answer: TRUE Answer:

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FE 213

1) Lenders recognize that holding collateral can reduce losses if the borrower defaults, but the presence of collateral has no impact on the risk of default. Answer: TRUE Answer: TRUE Answer: TRUE 2) RADRs are popular because they are consistent with the general disposition of financial decision makers toward rates of return. Answer: TRUE Answer: TRUE Answer:

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FE 224

1) The Jobs and Growth Tax Relief Reconciliation Act of 2009 significantly changed the tax treatment of corporate dividends for most taxpayers by dropping the tax rate to the rate applicable on capital gains, which is a maximum rate of 25%. Answer: FALSE Answer: FALSE Answer: FALSE 2) One of the key attributes that

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FE 252 Test 1

1) Most federal agency issues have short maturities and offer slightly higher yields than U.S. Treasury issues having similar maturities. Answer: TRUE Answer: TRUE Answer: TRUE 2) Spontaneous unsecured financing has a specific interest cost associated with it that can be at a fixed or floating rate. Answer: FALSE Answer: FALSE Answer: FALSE 3) The interest rate charged

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FE 279

1) The operating breakeven point can be found by solving for the sales level that just covers total fixed and variable costs. Answer: TRUE Answer: TRUE Answer: TRUE 2) From a bond issuer's perspective, the IRR on a bond's cash flows is its cost to maturity; from the investor's perspective, the IRR on a

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FE 330

1) Holding all other factors constant, a firm that is subject to a greater level of business risk should employ less financial leverage than an otherwise equivalent firm that is subject to a lesser level of business risk. Answer: TRUE Answer: TRUE Answer: TRUE 2) A floating inventory lien is a lender's claim on

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FE 343 1 Unlike Business

1) Unlike business bankruptcy and business failure, divestiture is often undertaken for positive motives in a manner that is consistent with the firm's strategic goals. Answer: TRUE Answer: TRUE Answer: TRUE 2) The World Trade Organization is an international body established to police world trading practices and to mediate disputes among member countries. Answer: TRUE Answer:

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FE 372

1) Investors should recognize that betas are calculated using historical data and that past performance relative to the market average may not accurately predict future performance. Answer: TRUE Answer: TRUE Answer: TRUE 2) If a market is truly efficient, investors should not waste their time trying to find and capitalize on mispriced securities. Answer: TRUE Answer: TRUE Answer:

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FE 393

1) The cost of capital is a static concept and it is not affected by economic and firm-specific factors such as business risk and financial risk. Answer: FALSE Answer: FALSE Answer: FALSE 2) The accountant of a firm evaluates financial statements, develops additional data, and makes decisions based on his or her assessment of the

Principles Of Managerial Finance 14th Edition

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FE 394 Test

1) A prospectus is another term for a firm's annual report showing the firm's prospects for the coming year. Answer: FALSE Answer: FALSE Answer: FALSE 2) Increased collection expenditures should reduce the investment in accounts receivable and bad debt expenses, increasing profits. Answer: TRUE Answer: TRUE Answer: TRUE 3) Historical weights are the present value of market price

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FE 395

1) Regular dividend policy is a dividend policy based on the payment of a certain fixed percentage of earnings to owners in each dividend period. Answer: FALSE Answer: FALSE Answer: FALSE 2) Because dividends are taxed at the same rate as capital gains under the 2003 Tax Act, a firm's strategy of paying low or

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FE 421 Quiz 2

1) Self-liquidating loans are intended merely to carry a firm through seasonal peaks in financing needs that are due primarily to buildups of accounts receivable and inventory. Answer: TRUE Answer: TRUE Answer: TRUE 2) The representative theory of dividends, as espoused by Modigliani and Miller, suggests that dividends represent a significant active decision variable

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FE 482 Quiz 1

1) The two basic types of risk associated with international cash flows are inflation and foreign exchange risks and political risks. Answer: TRUE Answer: TRUE Answer: TRUE 2) A revolving credit agreement is a form of financing consisting of short-term, unsecured promissory notes issued by firms with a high credit standing. Answer: FALSE Answer: FALSE Answer: FALSE 3)

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FE 483 Homework

1) The claims of the equityholders on a firm's assets have priority over the claims of creditors because the equityholders are the owners of the firm. Answer: FALSE Answer: FALSE Answer: FALSE 2) The interest rate on a line of credit is normally stated as a fixed rate-the prime rate. Answer: FALSE Answer: FALSE Answer: FALSE 3) In

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FE 530

1) A market risk-return function is a graphical presentation of the discount rates associated with each level of project risk. Answer: TRUE Answer: TRUE Answer: TRUE 2) It would be correct to define operating cash flow (OCF) as net operating profit after taxes plus depreciation. Answer: TRUE Answer: TRUE Answer: TRUE 3) The increase in bad debts associated

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FE 531 Test

1) The nominal rate of interest on a bond is 7% and an inflation premium of 3%. This results in a real rate of interest of 4% on the bond. Answer: FALSE Answer: FALSE Answer: FALSE 2) In case of unequal-lived, mutually exclusive projects, the use of net present value to select the better

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FE 602 Quiz 1

1) Operating leverage is present when a firm has fixed operating costs. Answer: TRUE Answer: TRUE Answer: TRUE 2) The cost of capital is a dynamic concept and it is affected by economic and firm-specific factors such as business risk and financial risk. Answer: TRUE Answer: TRUE Answer: TRUE 3) The required return can be affected by changes

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FE 607 Midterm 2

1) A portfolio combining two assets with less than perfectly positive correlation can reduce total risk to a level below that of either of the components. Answer: TRUE Answer: TRUE Answer: TRUE 2) The Gordon model assumes that the value of a share of stock equals the future value of the current price of

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FE 607 Quiz 3

1) In CAPM, the total risk is defined as the sum of nondiversifiable and diversifiable risk. Answer: TRUE Answer: TRUE Answer: TRUE 2) Federal agency issues are low-risk securities issued by government agencies but not guaranteed by the U.S. Treasury. Answer: TRUE Answer: TRUE Answer: TRUE 3) Target weights are either book value or market value weights based

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FE 611 Midterm 2

1) The liquidity preference theory suggests that for any given issuer, long-term interest rates tend to be higher than short-term rates due to the lower liquidity and higher responsiveness to general interest rate movements of longer-term securities; this causes the yield curve to be upward-sloping. Answer: TRUE Answer: TRUE Answer: TRUE 2) Any bond

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FE 670 Test

1) If the risk-free rate decreases due to a shift in government policy, the required return goes up. Answer: FALSE Answer: FALSE Answer: FALSE 2) Tangshan Mining issued $10,000 of commercial paper for $9,925 for 60 days. Based on this information, the effective annual rate of interest on the commercial paper would be about

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FE 682 Test 1

1) Accounting figures and cash flows are not necessarily the same due to the presence of certain non-cash expenditures on a firm's income statement. Answer: TRUE Answer: TRUE Answer: TRUE 2) If the ending cash is greater than the minimum cash balance, excess cash exists. Answer: TRUE Answer: TRUE Answer: TRUE 3) Simulation is an approach that evaluates

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FE 692 Homework

1) Safety stocks are extra inventories that can be drawn down when actual lead times and/or usage rates are greater than expected. Answer: TRUE Answer: TRUE Answer: TRUE 2) Fluctuations in foreign exchange markets can affect foreign revenues and profits of a multinational company, but they have no impact on its overall value. Answer: FALSE[/cpmembership] Answer:

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FE 760

1) A sophisticated capital budgeting technique that can be computed by solving for the discount rate that equates the present value of a project's inflows to the present value of its outflows is called internal rate of return. Answer: TRUE Answer: TRUE Answer: TRUE 2) A company's bonds will experience more trading activity (in

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FE 808 Quiz 3

1) Average age of inventory is viewed as the average length of time inventory is held by a firm or as the average number of days' sales in inventory. Answer: TRUE Answer: TRUE Answer: TRUE 2) Unsystematic risk can be eliminated through diversification. Answer: TRUE Answer: TRUE Answer: TRUE 3) Total leverage can be defined as the potential use

Principles Of Managerial Finance 14th Edition

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FE 897 Test

1) Higher the value of the times interest earned ratio, higher is the proportion of the firm's interest income compared to its contractual interest payments. Answer: FALSE Answer: FALSE Answer: FALSE 2) A call option is an option to sell a specified number of shares of a stock on or before some future date

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Fin 113 Final

1) Agents of corporate owners are themselves owners of the firm and have been elected by all the corporate owners to represent them in decision-making and management of the firm. Answer: FALSE Answer: FALSE Answer: FALSE 2) Capital markets are for investors who want a safe temporary place to deposit funds where they can

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FIN 113 Test

1) Securitization made it harder for banks to lend money because they could not pass the risk on to other investors. Answer: FALSE Answer: FALSE Answer: FALSE 2) Mortgage-backed securities are securities that represent claims on the cash flows generated by a pool of mortgages. Answer: TRUE Answer: TRUE Answer: TRUE 3) Returns from internationally diversified portfolios tend

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Fin 142

1) Since operating leases result in the receipt of services from an asset without increasing the assets or liabilities on a firm's balance sheet, leasing may result in misleading financial ratios. Answer: TRUE Answer: TRUE Answer: TRUE 2) If a new asset is being considered as a replacement for an old asset, the relevant

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FIN 142 Midterm 2

1) The cash conversion cycle of a firm is the length of time from the beginning of the production process to the collection of cash from the sale of finished products. Answer: FALSE Answer: FALSE Answer: FALSE 2) A bond will sell at a premium when its required return rises above its coupon interest rate. Answer:

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Fin 146 Midterm 2

1) Holding all other factors constant, a firm that is subject to a greater level of business risk should employ more financial leverage than an otherwise equivalent firm that is subject to a lesser level of business risk. Answer: FALSE Answer: FALSE Answer: FALSE 2) Spontaneous liabilities such as accounts payable and notes payable

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Fin 153 Midterm 1 1 A Capital

1) A capital expenditures analyst/manager is responsible for the evaluation and recommendation of proposed asset investments. Answer: TRUE Answer: TRUE Answer: TRUE 2) Since its objective is to minimize inventory investment, a Just-in-Time (JIT) system uses no, or very little, safety stocks. Answer: TRUE Answer: TRUE Answer: TRUE 3) Nonmanufacturing firms are more likely to have positive cash

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FIN 157 Homework

1) The DuPont formula allows a firm to break down its return into the net profit margin, which measures the firm's profitability on sales, and its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales. Answer: TRUE Answer: TRUE Answer: TRUE 2) The pecking order explanation of capital

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Fin 166 Quiz 1

1) The net effect of changes in a cash discount period is quite difficult to analyze because they are directly attributable to the three forces affecting a firm's investment in accounts receivable. Answer: TRUE Answer: TRUE Answer: TRUE 2) In ratio analysis, the financial statements being used for comparison should be dated at the

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FIN 176 Test 2

1) Float exists when a payee has received funds in a spendable form but these funds have not been withdrawn from the account of the payer. Answer: FALSE Answer: FALSE Answer: FALSE 2) Both warrants and rights result in new capital equity. However, warrants are issued at an exercise price below the prevailing market price

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Fin 177 Midterm 1

1) In most states, legal capital is measured either by the par value of common stock; other states, however, define legal capital to include not only the par value of the stock, but also any paid-in capital in excess of par. Answer: TRUE Answer: TRUE Answer: TRUE 2) By purchasing shares through a firm's

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Fin 197 1 Net Fixed Assets

1) Net fixed assets represent the difference between gross fixed assets and accumulated depreciation of fixed assets. Answer: TRUE Answer: TRUE Answer: TRUE 2) Given a financial manager's preference for faster receipt of cash flows, a longer depreciable life is preferred to a shorter one. Answer: FALSE Answer: FALSE Answer: FALSE 3) Financial leverage is concerned with the

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FIN 201 Midterm 1

1) Interest rate risk is the chance that changes in interest rates will adversely affect the value of an investment. Answer: TRUE Answer: TRUE Answer: TRUE 2) When a bond's value differs from par, its yield to maturity will differ from its coupon interest rate. Answer: TRUE Answer: TRUE Answer: TRUE 3) Money markets involve the trading of securities

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Fin 215 Quiz

1) In general, a firm's theoretical optimal capital structure is that which balances the tax benefits of debt financing against the increase probability of bankruptcy that result from its use. Answer: TRUE Answer: TRUE Answer: TRUE 2) Primary motives for merging include growth or diversification, synergy, fund raising, increased managerial skill or technology, tax considerations, increased

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FIN 247 1 A Functional Currency Is

1) A functional currency is the currency of the parent company's country. Answer: FALSE Answer: FALSE Answer: FALSE 2) A firm can retain more of its earnings if it can convince its stockholders that it will earn at least their required return on the reinvested funds. Answer: TRUE Answer: TRUE Answer: TRUE 3) Annualized net present value approach

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Fin 253 Midterm 2

1) Dividends paid to stockholders is tax deductible. Answer: FALSE Answer: FALSE Answer: FALSE 2) An efficient portfolio is a portfolio that maximizes return for a given level of risk or minimizes risk for a given level of return. Answer: TRUE Answer: TRUE Answer: TRUE 3) A firm's credit standard is a procedure for ranking an applicant's overall

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Fin 267 Test 2

1) A strike price is a price at which the holder of a call option can buy a specified amount of stock at any time prior to the option's expiration date. Answer: TRUE Answer: TRUE Answer: TRUE 2) Financial markets are intermediaries that channel the savings of individuals, businesses, and government into loans or

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Fin 280

1) Under a line of credit agreement, a bank may require an annual cleanup, which means that the borrower must pay off all its outstanding debts to all its operational creditors for a certain number of days during the year. Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] 2) The cost of marginal investment in accounts

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Fin 284

1) The marginal tax rate paid on a firm's ordinary income can be calculated by dividing its taxes by its net income. Answer: FALSE Answer: FALSE Answer: FALSE 2) The book value of an asset is equal to its installed cost of asset minus the accumulated depreciation. Answer: TRUE Answer: TRUE Answer: TRUE 3) Time value of money

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FIN 300 Test 2

1) Mail float is the delay between the deposit of a check by a payee and the actual availability of the funds. Answer: FALSE Answer: FALSE Answer: FALSE 2) One advantage of leasing is that in many cases, the return to the lessor is quite low so the firm in need of an asset might

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FIN 309 1 The Existence Of Specific

1) The existence of specific regulations and controls on dollar deposits in the United States, including interest rate ceiling imposed by the government, has contributed to the growth of the Euromarket. Answer: TRUE Answer: TRUE Answer: TRUE 2) Restrictive covenants are contractual clauses in long-term debt agreements that place certain operating and financial constraints on the

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FIN 323 Quiz 1

1) The conversion feature of a bond is a feature that is included in all corporate bond issues that gives the issuer the opportunity to repurchase bonds at a stated price prior to maturity. Answer: FALSE Answer: FALSE Answer: FALSE 2) A prospectus is a portion of the security registration statement that describes the

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Fin 330 Quiz 1

1) The target capital structure is the desired optimal mix of debt and equity financing that most firms attempt to achieve and maintain. Answer: TRUE Answer: TRUE Answer: TRUE 2) The conversion feature, which can be part of either a bond or preferred stock, permits a firm to raise additional funds at some point in

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FIN 366 Quiz 1 The Lower The

1) The lower the fixed-payment coverage ratio, the lower is the firm's financial leverage. Answer: FALSE Answer: FALSE Answer: FALSE 2) All benefits expected from a proposed project must be measured on a cash flow basis which may be found by adding any non-cash charges deducted as an expense on a firm's income statement back

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FIN 406

1) The nominal and effective rates are equivalent for annual compounding. Answer: TRUE Answer: TRUE Answer: TRUE 2) Because of their access to the international bond and equity markets, MNCs may have lower long-term financing costs, thus resulting in differences between the capital structures of these firms and those of purely domestic companies. Answer: TRUE Answer:

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Fin 423 Final

1) On a purely theoretical basis, IRR is the better approach to capital budgeting than NPV because IRR implicitly assumes that any intermediate cash inflows generated by an investment are reinvested at the firm's cost of capital. Answer: FALSE Answer: FALSE Answer: FALSE 2) An aging schedule breaks down accounts receivable into groups on

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FIN 442

1) When considering a firm's financial decision alternative, financial managers should accept only those actions that are expected to increase the firm's profitability. Answer: FALSE Answer: FALSE Answer: FALSE 2) The required return on an asset is an increasing function of its nondiversifiable risk. Answer: TRUE Answer: TRUE Answer: TRUE 3) Because preferred stock is a form of

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Fin 448 Quiz 3 1 Debt Capital Is

1) Debt capital is less risky than equity capital because a firm is legally obligated to pay interest to bondholders but they are not legally obligated to pay dividends to preferred or common stockholders. Answer: TRUE Answer: TRUE Answer: TRUE 2) Standard deviation measures the dispersion of an investment's return around the expected return. Answer: TRUE Answer:

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FIN 453 Midterm 1 1 The Book Value

1) The book value per share of common stock is the amount per share of common stock that would be received if all of a firm's assets were sold for their accounting value and the proceeds remaining were divided among common stockholders. Answer: TRUE Answer: TRUE Answer: TRUE 2) The sale of a unit of

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FIN 463 Midterm

1) A treasurer is responsible for the firm's accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting. Answer: FALSE Answer: FALSE Answer: FALSE 2) An increase in cost (fixed cost or variable cost) tends to increase the operating breakeven point, whereas an increase in the sales price per unit will

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Fin 484

1) Since the issuer of zero (or low) coupon bonds can annually deduct the current year's interest accrual without having to actually pay the interest until the bond matures (or is called), its cash flow each year is increased by the amount of the tax shield provided by the interest deduction. Answer:

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FIN 497 Quiz 2

1) The presence of contingent securities such as warrants and stock options affects the reporting of a firm's earnings per share. Answer: TRUE Answer: TRUE Answer: TRUE 2) The cost of marginal bad debts is found by multiplying a firm's opportunity cost by the difference between the level of bad debts before and after

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FIN 504 Test

1) The pecking order explanation of capital structure states that a hierarchy of financing exists for firms, in which new external debt financing is employed first, followed by retained earnings and finally by external equity financing. Answer: FALSE Answer: FALSE Answer: FALSE 2) Both theory and empirical evidence indicate that the capital structures of MNCs

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FIN 506 Midterm 1

1) In case of international capital budgeting, a U.S. company can minimize its political risk by creating a joint venture with a competent and well-connected local partner. Answer: TRUE Answer: TRUE Answer: TRUE 2) A call feature in a bond allows bondholders to change each bond into a stated number of shares of common stock. Answer:

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FIN 511 Quiz 3

1) Under recapitalization, debts are generally exchanged for equity or the maturities of existing debts are extended. Answer: TRUE Answer: TRUE Answer: TRUE 2) Strategic mergers seek to achieve various economies of scale by eliminating redundant functions, increasing market share, and improving raw material sourcing and finished product distribution. Answer: TRUE Answer: TRUE Answer: TRUE 3) In partnerships,

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Fin 516 1 The Creation Of A

1) The creation of a portfolio by combining two assets having perfectly positively correlated returns cannot reduce the portfolio's overall risk below the risk of the least risky asset. Answer: TRUE Answer: TRUE Answer: TRUE 2) Mutually exclusive projects are those whose cash flows compete with one another; the acceptance of one eliminates the

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FIN 516 Quiz 2

1) In the ABC system of inventory management, the two-bin method or system could be utilized to control C items. Answer: TRUE Answer: TRUE Answer: TRUE 2) For a Eurodollar bond, the interest rate will reflect several different rates, most notably the U.S. long-term rate, the Eurodollar rate, and long-term rates in other countries. Answer: TRUE Answer:

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FIN 524 Test

1) The real utility of the coefficient of variation is in comparing assets that have equal expected returns. Answer: FALSE Answer: FALSE Answer: FALSE 2) Treasury notes generate lower returns than U.S. Treasury bills. Answer: FALSE Answer: FALSE Answer: FALSE 3) Preferred stockholders are often referred to as residual claimants. Answer: FALSE Answer: FALSE Answer: FALSE 4) By using convertible bonds, an

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Fin 586

1) Research and development is considered to be a motive for making capital expenditures. Answer: TRUE Answer: TRUE Answer: TRUE 2) Disbursement float results from the delay between the time that a payer or customer deducts a payment from its checking account ledger (disburses it) and the time that a payee or vendor actually

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Fin 586 1 Converting A Convertible

1) Converting a convertible security is beneficial when the market price of the common stock into which it can be converted is greater than its conversion price. Answer: TRUE Answer: TRUE Answer: TRUE 2) An increase in a firm's risk will always result in a higher share price since the stockholder must be compensated

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Fin 598 Test 2

1) Since the sales price per unit generally decreases with volume and the cost per unit generally increases with volume, the true breakeven point may be different from those obtained using linear revenue and cost functions as assumed in the breakeven analysis. Answer: TRUE Answer: TRUE Answer: TRUE 2) The inclusion of assets from

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FIN 599 1 A Shareholder Receiving A

1) A shareholder receiving a stock dividend typically receives nothing of value. Answer: TRUE Answer: TRUE Answer: TRUE 2) Pledges of accounts receivable are never made on a notification basis because the lender does not trust the borrower to collect the pledged account receivable and remit these payments as they are received. Answer: FALSE Answer: FALSE Answer:

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Fin 633 1 The Base Level Of Sales

1) The base level of sales must be held constant to compare the total leverage associated with different levels of fixed costs. Answer: TRUE Answer: TRUE Answer: TRUE 2) Foreign bond is an international bond that is sold primarily in countries other than the country of the currency in which the issue is denominated. Answer: FALSE Answer:

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FIN 636 Quiz 3 1 The Breakeven

1) The breakeven point in dollars can be computed by dividing the contribution margin into the variable operating costs. Answer: FALSE Answer: FALSE Answer: FALSE 2) National entry control systems are comprehensive rules, regulations, and incentives introduced by host governments to regulate inflows of foreign direct investment from MNCs and at the same time

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FIN 656

1) Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, currently dividends are subject to a maximum tax rate of 8 percent. Answer: FALSE Answer: FALSE Answer: FALSE 2) The operating cycle is the length of time a firm's cash is tied up between payment for production inputs and receipt of payment from

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FIN 656 1 A Stock Split Commonly

1) A stock split commonly increases the stock's per share par value. Answer: FALSE Answer: FALSE Answer: FALSE 2) Business risk is the risk to a firm of being unable to cover operating costs. Answer: TRUE Answer: TRUE Answer: TRUE 3) The dominant organized options exchange in which options are traded is the Chicago Board Options Exchange (CBOE). Answer: TRUE Answer:

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Fin 662 1 The Foreign Direct

1) The foreign direct investment (FDI) is a multi-national corporation's transfer of capital, managerial, and technical assets from a foreign country to its home country. Answer: FALSE Answer: FALSE Answer: FALSE 2) A lease arrangement has many more restrictive covenants than those that are normally included as part of a long-term loan. Answer: FALSE Answer: FALSE Answer:

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Fin 663 Test 2

1) A primary market is a financial market in which pre-owned securities are traded. Answer: FALSE Answer: FALSE Answer: FALSE 2) GAAP is the accounting profession's rule-setting body. Answer: FALSE Answer: FALSE Answer: FALSE 3) Consolidation involves the combination of two or more firms, and the resulting firm maintains the identity of one of the firms. Answer: FALSE Answer: FALSE Answer:

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Fin 664 Test 2

1) A major decision confronting a business firm when purchasing marketable securities involves a trade-off between the opportunity to earn a return on idle funds during the holding period and the brokerage costs associated with the purchase and sale of marketable securities. Answer: TRUE Answer: TRUE Answer: TRUE 2) In the EOQ model, the

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FIN 666 Midterm 2

1) Like business bankruptcy and business failure, divestiture is most often undertaken to relieve pressure by creditors such as bondholders and banks due to the firm's relatively high debt levels. Answer: FALSE Answer: FALSE Answer: FALSE 2) Under conservative funding strategy, short-term financing is used only to finance an emergency, an unexpected outflow of

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FIN 669 Quiz 1

1) The greater the leverage, the smaller the risk involved. Answer: FALSE Answer: FALSE Answer: FALSE 2) A call feature in a bond allows the issuer the opportunity to repurchase bonds at a stated price prior to maturity, and this option has a greater chance of being exercised (to the benefit of the bondholder) if

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FIN 677 1 Unlike Convertible

1) Unlike convertible securities, warrants cannot be called, but their limited life stimulates holders to exercise them when the exercise price is below the market price of the firm's stock. Answer: TRUE Answer: TRUE Answer: TRUE 2) In general, the greater a firm's operating leverage, the higher its business risk. Answer: TRUE Answer: TRUE Answer: TRUE 3) In the

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Fin 678 Quiz 1

1) There is an inverse relationship between the quality or rating of a bond and the rate of return it must provide bondholders. Answer: TRUE Answer: TRUE Answer: TRUE 2) A firm can raise capital by issuing securities such as convertibles and warrants but a firm has nothing to do with the creation of

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FIN 687 Homework

1) One of the key attributes that makes a firm a good candidate for an LBO is that it has a relatively high level of debt and a low level of liquid assets. Answer: FALSE Answer: FALSE Answer: FALSE 2) A stock split is usually taxable to a firm as it restructures the capital. Answer: FALSE Answer:

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Fin 690 Midterm 2

1) A corporate controller is an officer responsible for a firm's financial activities such as financial planning and fund raising, making capital expenditure decisions, and managing cash, credit, the pension fund, and foreign exchange. Answer: FALSE Answer: FALSE Answer: FALSE 2) Futures and options are opportunities that are embedded in capital budgeting projects that enable managers

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FIN 691 Final

1) The motive to pay stock dividend to retain cash to satisfy past-due bills, may result in a decline in market value. Answer: TRUE Answer: TRUE Answer: TRUE 2) The effective rate of interest is the contractual rate of interest charged by a lender or promised by a borrower. Answer: FALSE Answer: FALSE Answer: FALSE 3) Flotation costs reduce

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Fin 699 1 Because Retained

1) Because retained earnings are a form of internal financing, the dividend decision can significantly affect a firm's external financing requirements. Answer: TRUE Answer: TRUE Answer: TRUE 2) Investment A guarantees its holder $100 return. Investment B earns $0 or $200 with equal chances (i.e., an average of $100) over the same period. Both

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Fin 706 Homework

1) The security agreement is an agreement between the borrower and the lender that specifies the collateral held against a secured loan. Answer: TRUE Answer: TRUE Answer: TRUE 2) Changes in risk aversion, and therefore shifts in the SML, result from changing tastes and preferences of investors, which generally result from various economic, political, and

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FIN 713 Test

1) Most managers are risk-averse, since for a given increase in risk they require an increase in return. Answer: TRUE Answer: TRUE Answer: TRUE 2) Marketable securities are short-term, interest-earning, money market instruments that can easily be converted into cash. Answer: TRUE Answer: TRUE Answer: TRUE 3) Purchasers of a stock selling ex dividend receive the current dividend. Answer: FALSE Answer:

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Fin 724 Homework

1) In general, with an amortized loan, the payment amount remains constant over the life of the loan, the principal portion of each payment declines over the life of the loan, and the interest portion of each payment grows over the life of the loan. Answer: FALSE Answer: FALSE Answer: FALSE 2) The term

Principles Of Managerial Finance 14th Edition

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FIN 753 Quiz 2

1) Call options are purchased with the expectation that the market price of the underlying security will rise while put options are purchased with the expectation that the market price of the underlying security will fall. Answer: TRUE Answer: TRUE Answer: TRUE 2) The total leverage measures the combined effect of operating and financial

Principles Of Managerial Finance 14th Edition

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FIN 766 Quiz 1

1) Treasury stocks held within the corporation do not have voting rights but have a claim on assets in liquidation. Answer: FALSE Answer: FALSE Answer: FALSE 2) An investment's total return is the sum of any cash distributions minus the change in the investment's value, divided by the beginning-of-period value. Answer: FALSE Answer: FALSE Answer: FALSE 3) The

Principles Of Managerial Finance 14th Edition

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FIN 782

1) The ratio of exchange in market price indicates the market price per share of an acquiring firm paid for each dollar of market price per share of the target firm. Answer: TRUE Answer: TRUE Answer: TRUE 2) Maintenance clauses are provisions normally included in an operating lease that require the lessor to maintain

Principles Of Managerial Finance 14th Edition

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Fin 787 Test 1

1) The free cash flow valuation model is based on the same principle as dividend valuation models; that is, the value of a share of stock is the present value of future cash flows. Answer: TRUE Answer: TRUE Answer: TRUE 2) The conversion value is the value of a convertible security as measured by the

Principles Of Managerial Finance 14th Edition

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FIN 789 Final

1) A project's net present value profile is a graph that plots a project's NPV for various discount rates. Answer: TRUE Answer: TRUE Answer: TRUE 2) A bond with short maturity has less "interest rate risk" than a bond with long maturity when all other featurescoupon interest rate, par value, and interest payment frequencyare the

Principles Of Managerial Finance 14th Edition

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FIN 801 Quiz 1

1) Weights that use accounting values to measure the proportion of each type of capital in a firm's financial structure are called market value weights. Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] 2) Capital budgeting is the process of evaluating and selecting short-term investments that are consistent with the firm's goal of maximizing owners' wealth. Answer:

Principles Of Managerial Finance 14th Edition

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FIN 806

1) Cross-sectional analysis involves the comparison of different firms' financial ratios at the same point in time. Answer: TRUE Answer: TRUE Answer: TRUE 2) A cash budget gives the financial manager a clear view of the timing of a firm's expected profitability over a given period. Answer: FALSE Answer: FALSE Answer: FALSE 3) In general, floatation costs include two

Principles Of Managerial Finance 14th Edition

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FIN 843 Test 2

1) The cost of equity increases with increasing financial leverage in order to compensate the stockholders for the higher degree of financial risk. Answer: TRUE Answer: TRUE Answer: TRUE 2) A controller administers a firm's credit policy by analyzing or managing the evaluation of credit applications, extending credit, and monitoring and collecting accounts receivable. Answer:

Principles Of Managerial Finance 14th Edition

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Fin 849 Midterm 2

1) The conversion ratio is the ratio at which a convertible security can be exchanged for a nonconvertible security. Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] 2) Multinational companies are firms that have international assets but operations in domestic markets only and draw part of their total revenue and profits from such markets. Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] Answer: FALSE[/cpmembership] 3)

Principles Of Managerial Finance 14th Edition

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FIN 856

1) The interest rates offered in the Euromarket on the U.S. dollar are greatly affected by the prime rate inside the United States. Answer: TRUE Answer: TRUE Answer: TRUE 2) A compensating balance is a balance in checking account that is equal to a certain percentage of the borrower's short-term unsecured loan. Answer: TRUE Answer: TRUE Answer: TRUE 3)

Principles Of Managerial Finance 14th Edition

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Fin 868 Quiz 2

1) The number of authorized shares of common stock is always greater than or equal to the number of outstanding shares of common stock. Answer: TRUE Answer: TRUE Answer: TRUE 2) The reorder point is the point at which a firm receives orders. Answer: FALSE Answer: FALSE Answer: FALSE 3) As financial leverage increases, the cost of debt

Principles Of Managerial Finance 14th Edition

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FIN 895 Midterm 2

1) In the U.S. over the past 30 years, foreign direct investment (FDI) came overwhelmingly in the form of mergers and acquisitions rather than through establishments. Answer: TRUE Answer: TRUE Answer: TRUE 2) The overriding goal for merging is the maximization of the owners' wealth as reflected in the acquirer's share price. Answer: TRUE Answer: TRUE Answer:

Principles Of Managerial Finance 14th Edition

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Principles Of Managerial Finance 14th Edition

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Students