1) If we assume that inventory is used up at a constant rate and safety stock is zero, the
average inventory will be half the re-order size.
2) Projects that are totally uncorrelated provide more overall risk reduction than
negatively correlated projects.
3) The Dodd-Frank Act’s oversight allowing regulation of banking fees and available
products has been considered as not being in the best interests of a free market.
4) Although debt financing is generally cheaper than equity financing, financial
managers should not use debt financing significantly above the industry standard
because it can increase the firm’s overall cost of capital.
5) An increase in sales accompanied by an increase in accounts payable will reduce the
amount of new external funds required, all else being equal.
6) Investors tend to decrease required rates of return over time for projects with longer
lives.
7) For firms in industries that offer some degree of stability, are in a positive stage of
growth, and are operating in favorable economic conditions, the use of debt is not
needed or recommended.
8) American Depository Receipts (ADRs) are certificates that give foreign stockholders
a legal claim on U.S. companies’ foreign stock.
9) If you purchased a convertible bond when first issued, you would pay more for the
shares of stock you are entitled to than if you purchased the shares directly on the
market at that point in time.
10) The amount of annual payments necessary to repay a mortgage loan can be found
by reference to the present value of an annuity table.