Which one of the following will increase a bid price?
A. a decrease in the fixed costs
B. a reduction in the net working capital requirement
C. a reduction in the firm's tax rate
D. an increase in the salvage value
E. an increase in the required rate of return
When a manager develops a cost of capital for a specific project based on the cost of
capital for another firm which has a similar line of business as the project, the manager
is utilizing the _____ approach.
A. subjective risk
B. pure play
C. divisional cost of capital
D. capital adjustment
E. security market line
You have computed the break-even point between a levered and an unlevered capital
structure. Assume there are no taxes. At the break-even level, the:
A. firm is just earning enough to pay for the cost of the debt.
B. firm's earnings before interest and taxes are equal to zero.
C. earnings per share for the levered option are exactly double those of the unlevered
D. advantages of leverage exceed the disadvantages of leverage.
Employee stock options:
A. usually have a positive intrinsic value when issued.
B. must be backdated at least six months to comply with Sarbanes-Oxley.
C. are generally "underwater" when issued.