Business projects virtually always involve:
A.capital budgets.
B.early cash inflows and later outflows.
C.early cash outflows and later inflows.
D.quick payback periods.
Anti-trust legislation:
A.is enforced by the Justice Department as well as the Federal Trade Commission.
B.no longer applies to business combinations.
C.does not apply to conglomerate mergers.
D.a and c
E.None of the above
Opportunity cost is the:
A.benefit that would have been available from the next best use of money.
B.prime rate for large firms.
C.unemployment rate.
D.rate on standard savings accounts.
In any economy as a whole, the level of saving for a given period of time must ____ the
level of investing.
A.be greater than
B.be unrelated to
C.equal
D.be less than
In general, investments yielding higher returns will have:
A.lower tax rates.
B.higher dividend payments.
C.higher risk.
D.lower standard deviations.
Assume you want to construct a portfolio with a 14 percent return from the following
two securities:
What percentage of your portfolio should be invested in Security 1?
A.57%
B.47%
C.43%
D.53%
Assume a firm’s bonds are currently yielding new investors 6%. The combined federal
and state tax rate is 40%. What is the firm’s after-tax cost of debt is?
A.3.6%
B.4.0%
C.4.8%
D.6.0%
Figgins Corp. projects a return on sales of 6%, a total asset turnover of 2.0, a debt ratio
of 50% and a dividend payout ratio of 30%. What is Figgins’ sustainable growth rate?
A.1.8%
B.4.2%
C.7.2%
D.12.0%
E.16.8%
The term “red herring” relates to the:
A.SEC’s approval of a stock offering from a company whose future is questionable.
B.circulation of the company’s prospectus prior to approval by the SEC.
C.document distributed to potential investors that is stamped “incomplete information.”
D.SEC’s conditional approval of the prospectus.
Hatter Inc. has the following capital components and costs. Calculate Hatter’s WACC.
A.11.67%
B.12.41%
C.13.73%
D.14.55%
Investors don’t diversify entirely with negative beta stocks because:
A.they are generally poor investments otherwise.
B.they’re not as desirable or exciting as high beta stocks on which one can make a lot of
money.
C.there aren’t very many of them around.
D.All of the above