Credit extended in connection with goods purchased for resale is called:
A.commercial paper.
B.bank loans.
C.trade credit or payables.
D.commercial credit.
Why would a corporation purchase the stock of another corporation?
A.To prevent double taxation of its shareholders
B.Because dividends received by a corporation are partially tax exempt
C.It is equivalent to a tax carried forward
D.It is equivalent to a tax carried back
The expected rate of return for 3COM is 18 percent, with a standard deviation of 10.98
percent. The expected rate of return for Just the Fax is 26 percent with a standard
deviation of 15.86%. Which firm would be considered the riskier from a total risk
perspective?
A.3COM
B.Just the Fax
C.Neither, both have the same risk in a relative sense.
D.Cannot be determined
Which of the following is likely to be true of a valuable abandonment option?
A.It makes the NPV of all of the possible outcomes at least equal to zero.
B.It reduces the project’s risk.
C.It improves the project’s expected NPV.
D.Both a. and c. are correct.
E.Both b. and c. are correct.
Which of the following is not a source of short-term funds?
A.Trade credit
B.Accounts receivable
C.Commercial paper
D.Line of credit
Which of the following is not associated with federal government debt?
A.Liquidity risk
B.Default risk
C.Maturity Risk
D.Both a & b
E.All of the above
Mutually exclusive projects:
A.are usually different alternatives to meeting the same need.
B.occur where the acceptance or rejection of one alternative project has no bearing on
the acceptance or rejection of other projects.
C.are best analyzed by the profitability index.
D.None of the above
Which of the following is not a date associated with the payment of dividends?
A.The declaration date
B.The earnings per share announcement date
C.The payment date
D.The date of record
The purchase of real estate is:
A.a financing activity if the firm uses debt financing.
B.an operating activity.
C.an investing activity.
D.an investing activity only if the firm uses equity financing.
Rank in chronological sequence the payment date, ex-dividend date, declaration date,
and record date.
A.Record date, declaration date, ex-dividend date, payment date
B.Declaration date, record date, ex-dividend date, payment date
C.Declaration date, record date, payment date, ex- dividend date
D.Declaration date, ex-dividend date, record date, payment date
Under the residual view, _____ only after all viable capital budgeting projects are
funded.
A.dividends are paid
B.dividends are withheld
C.dividends are reinvested
D.stock dividends are paid
What is the Present Value (PV) of the following series of cash flows using an 8%
discount rate?
A.Less than $1200
B.$1201 – $1250
C.$1251 – $1300
D.$1301 – $1350
E.More than $1350
If a stock has a dividend yield of 1.50%, and pays an annual dividend of $.80, its price
is:
A.$11.25.
B.$21.00.
C.$53.33.
D.None of the above.
A stand-alone capital project has the following cash flows.
What is its NPV if the cost of capital is 10%?
A.$106,142
B.($6,142)
C.$934
D.$6,142
A firm’s bad debts:
A.should be reduced by more aggressive collection procedures.
B.are normally positively related to a firm’s ACP.
C.are normally unaffected by changes in a firm’s cash discount.
D.a and b
E.All of the above
Which of the following is an indirect planning assumption?
A.A 3% reduction in product price
B.A decrease in interest rates from 8% to 7%
C.An improvement in the average collection period from 45 to 40 days
D.None of the above are indirect assumptions.