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ACC 576 Week 8 Quiz (All Possible Questions)
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ACC 576 Week 8 Quiz (All Possible Questions)

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ACC 576 Week 8 Quiz (All Possible Questions)

ACC 576 Week 8 Study

1.      Regarding financial resources, financial management is concerned with the efficiency and effectiveness of which of the following?

2.      Which of the following financial management-related areas are considered long-term issues?

3.      Which one of the following would be considered a long-term financial management activity or concern?

4.      Financial management involves decisions and activities that deal with

5.      Which of the following "tools" are likely to be used in financial management?

6.      A company has the following target capital structure and costs:The company's marginal tax rate is 30%. What is the company's weighted-average cost of capital?

7.      A company has the following financial information: To maximize shareholder wealth, the company should accept projects with returns greater than what percent?

8.      The measurement of the benefit lost by using resources for one purpose and not another is

9.      Which of the following statements is correct regarding the weighted-average cost of capital (WACC)?

10.  Carter Co. paid $1,000,000 for land three years ago. Carter estimates it can sell the land for $1,200,000, net of selling costs. If the land is not sold, Carter plans to develop the land at a cost of $1,500,000. Carter estimates net cash flow from the development in the first year of operations would be $500,000. What is Carter's opportunity cost of the development?

11.  A company with a combined federal and state tax rate of 30% has the following capital structure:What is the weighted-average after-tax cost of capital for this company?

12.  Which of the following is assigned to goods that were either purchased or manufactured for resale?

13.  Management at MDK Corp. is deciding whether to replace a delivery van. A new delivery van costing $40,000 can be purchased to replace the existing delivery van, which cost the company $30,000 and has accumulated depreciation of $20,000. An employee of MDK has offered $12,000 for the old delivery van. Ignoring income taxes, which of the following correctly states relevant costs when making the decision whether to replace the delivery vehicle?

14.  Alpha Corporation has the following capital structure and related cost of capital for each source: Which one of the following is Alpha's weighted average cost of capital?

15.  A company uses its company-wide cost of capital to evaluate new capital investments. What is the implication of this policy when the company has multiple operating divisions, each having unique risk attributes and capital costs?

16.  Which one of the following costs, if any, is relevant in making financial decisions?

17.  Buff Co. is considering replacing an old machine with a new machine. Which of the following items is economically relevant to Buff's decision? (Ignore income tax considerations.)

18.  The ABC Company is trying to decide between keeping an existing machine and replacing it with a new machine. The old machine was purchased just two years ago for $50,000 and had an expected life of 10 years. It now costs $1,000 a month for maintenance and repairs, due to a mechanical problem. A new replacement machine is being considered, with a cost of $60,000. The new machine is more efficient and it will only cost $200 a month for maintenance and repairs. The new machine has an expected life of 10 years. In deciding to replace the old machine, which of the following factors, ignoring income taxes, should ABC not consider?

19.  Egan Co. owns land that could be developed in the future. Egan estimates it can sell the land for $1,200,000, net of all selling costs. If it is not sold, Egan will continue with its plans to develop the land. As Egan evaluates it options for development or sale of the property, what type of cost would the potential selling price represent in Egan's decision?

20.  Which of the following statements is true regarding opportunity cost?

21.  For the year ended December 31, 2004, Abel Co. incurred direct costs of $500,000 based on a particular course of action during the year. If a different course of action had been taken, direct costs would have been $400,000. In addition, Abel's 2004 fixed costs were $90,000. The incremental cost was

22.  Pole Co. is investing in a machine with a 3-year life. The machine is expected to reduce annual cash operating costs by $30,000 in each of the first 2 years and by $20,000 in year 3. Present values of an annuity of $1 at 14% are:Using a 14% cost of capital, what is the present value of these future savings?

23.  Which one of the following kinds of tables most likely would be used to determine the current worth of five equal amounts to be received at the end of each of the next five years.

24.  Which of the following changes would result in the highest present value?

25.  On August 31, 2004, Ashe Corp. adopted a plan to accumulate $1,000,000 by September 1, 2008. Ashe plans to make four equal annual deposits to a fund that will earn interest at 10% compounded annually. Ashe will make the first deposit on September 1, 2004. Future value and future amount factors are as follows: Which one of the following would be the amount of annual deposits Ashe should make (rounded)?

26.  Which one of the following sets of interest (or discount) rates will give the greater present value of $1.00 and greater future value of $1.00?

27.  On November 1, 2005, a company purchased a new machine that it does not have to pay for until November 1, 2007. The total payment on November 1, 2007 will include both principal and interest. Assuming interest at a 10% rate, the cost of the machine would be the total payment multiplied by what time value of money concept?

28.  A corporation obtains a loan of $200,000 at an annual rate of 12%. The corporation must keep a compensating balance of 20% of any amount borrowed on deposit at the bank, but it normally does not have a cash balance account with the bank. What is the effective cost of the loan?

29.  A company has an outstanding one-year bank loan of $500,000 at a stated interest rate of 8%. The company is required to maintain a 20% compensating balance in its checking account. The company would maintain a zero balance in this account if the requirement did not exist. What is the effective interest rate of the loan?

30.  Josey maintained a $10,000 balance in his savings account throughout 2008, the first year of the account. The savings account paid 2% interest compounded annually. For 2008, the inflation rate was 3%. For 2008, what is Josey's real interest rate on the savings account?

31.  Which one of the following is interest earned on both an initial principal and the unpaid accrued interest that accumulated on that principal from prior periods?

32.  Beta Company has arranged to borrow $10,000 for 180 days. Beta will repay the principal amount plus $600 in interest at the maturity of the note.Which one of the following is the annual percentage rate (APR) of interest that Beta is paying on the loan?

33.  Which one of the following is the annual rate of interest applicable when not taking trade credit terms of "2/10, net 30?"

34.  The following information is available on market interest rates: What is the market rate of interest on a one-year U.S. Treasury bill?

35.  Which one of the following U.S. GAAP approaches to determining fair value converts future amounts to current amounts?

36.  Which of the following U.S. GAAP levels of inputs for valuation purposes is/are based on observable inputs?

37.  Conceptually, which one of the following U.S. GAAP approaches for determining value is most likely to provide the best evidence of fair value?

38.  Which of the following characteristics, if any, should be taken into account in valuing a specific item?

39.  Under U.S. GAAP requirements, valuation may be based on an

40.  Which of the following level(s) of input in the U.S. GAAP hierarchy of inputs for fair value determination is/are likely to be most appropriate for valuing basic agricultural commodities?

41.  Assuming they are traded in an active market, which of the following types of investments, if any, could be valued using level 1 inputs of the U.S. GAAP hierarchy of inputs for determining fair value?

42.  Quoted prices in which of the following types of markets could be level 2 inputs in determining fair value under the U.S. GAAP hierarchy of inputs for fair value determination?

43.  Which of the following levels of the U.S. GAAP hierarchy of inputs used for determining fair value can be based on inputs not directly observable for the item being valued?

44.  Which of the following types of active markets, if any, would be considered as providing level 1 inputs under the U.S. GAAP hierarchy of inputs for fair value determination?

45.  Which one of the following beta values indicates the least volatility?

46.  Which one of the following is not a limitation of the capital asset pricing model?

47.  Assume the following rates exist in the U.S.: Prime interest rate          = 6%

48.  Fed discount rate         = 4% U.S. Treasury Bond rate = 2% Inflation rate       = 1% which one of the following is most likely the nominal risk-free rate of return in the U.S.?

49.  Assume the following values for an investment: Risk-free rate of return = 2% Expected rate of return = 9% Beta = 1.4 which one of the following is the required rate of return for the investment?

50.  Which one of the following is not an element in the capital asset pricing model formula?

51.  A graph that plots beta would show the relationship between

52.  Which one of the following is not a factor routinely considered in valuing a stock option?

53.  Charles Allen was granted options to buy 100 shares of Dean Company stock. The options expire in one year and have an exercise price of $60.00 per share. An analysis determines that the stock has an 80% probability of selling for $72.50 at the end of the one-year option period and a 20% probability of selling for $65.00 at the end of the year. Dean Company's cost of funds is 10%. Which one of the following is most likely the current value of the 100 stock options?

54.  Which one of the following is not a limitation of the basic Black-Scholes option pricing model?

55.  Which one of the following characteristics is not an advantage of the Black-Scholes option pricing model?

56.  Which one of the following options, A through D, is most likely to have the greatest value (all other things being equal)?

57.  Assume the following abbreviated Income Statement: In a common-size income statement, which one of the following percentages would be shown for Finance Expense?

58.  Which one of the following approaches to valuing a business is most likely to be appropriate when the business has been losing money and is going to be sold in a distressed sale?

59.  Which one of the following is least likely to be the reason an entity would seek a valuation of the entity as a going concern?

60.  Assume the following abbreviated Balance Sheet: In a common-sized balance sheet, which one of the following percentages would be shown for current liabilities?

61.  A business with a net book value of $150,000 has an appropriate fair value of $120,000. Charles Harvey, one of three owners, has decided to sell his 10% interest in the business. Which one of the following is most likely the amount at which Harvey can sell his interest?

62.  Which one of the following is not a major approach for assigning a value to an entire going business?

63.  Which one of the following shows the basic approach used to capitalize earnings to determine the value of a business?

64.  Common-size financial statements are useful in making comparisons

65.  Which of the following statements, if any, concerning the valuation of business enterprises is/are correct? I. Nonpublic entities are likely to be more difficult to value than publicly traded entities. II. The conditions in the macroeconomic environment should be considered in valuing an entity. III. The status of the industry in which a business operates should be considered in valuing the entity.

66.  The P/E ratio for a share of common stock is computed as:

67.  Which one of the following is not an income approach to the valuation of a business?

68.  The land and building that constitute a strip shopping mall were valued using the recent sales price of a comparable strip shopping mall located across the street. The method of valuation would be an example of the

69.  Which one of the following is not a qualitative forecasting method?

70.  Business forecasting can use

71.  Which one of the following sets shows each type of business forecasting in the correct method classification?

72.  Which one of the following sets best reflects the relationship between the method of forecasting and the nature of forecasting?

73.  Which one of the following forecasting methods is based on extrapolation of past data?

74.  Which one of the following sets shows the most likely method appropriate for short-term and long-term forecasting?

75.  Which one of the following statements describes a difference between the simple moving average and the weighted moving average times series models for forecasting?

76.  Each month Fuco, Inc. forecasts its next three months sales using the average of its actual sales for the most recent 12 months. Which one of the following times series models is Fuco using to forecast sales?

77.  Which one of the following would be a time series model for forecasting that reduces random fluctuations in data?

78.  Data patterns that reflect an upward movement over a long period of time would describe which one of the following patterns?

79.  Which one of the following is not a causal model approach to forecasting?

80.  Which one of the following is not a time series pattern?

81.  Which one of the following identifies the rate of return required by investors to compensate them for deferring current consumption when making an investment?

82.  A graph of the relationship between financial risk and expected financial reward would show a curve that has a:

83.  The presence of risk for a portfolio of projects means:

84.  Which one of the following risks is least likely to be mitigated by project diversification?

85.  As the perceived risk of an undertaking increases, what would be the expected effect on the risk-free rate of return and the risk premium rate of return?

86.  A project has an initial outlay of $1,000. The projected cash inflows earned evenly over each year are: Year 1            $200 Year 2     200 Year 3       400 Year 4       400 what is the investment's payback period?

87.  Which one of the following is not a technique or approach for evaluating capital budgeting opportunities?

88.  Major Corp. is considering the purchase of a new machine for $5,000 that will have an estimated useful life of five years and no salvage value. The machine will increase Major's after-tax cash flow by $2,000 annually for five years. Major uses the straight-line method of depreciation and has an incremental borrowing rate of 10%. The present value factors for 10% are as follows: Ordinary annuity with five payments        3.79 Annuity due for five payments        4.17 using the payback method, how many years will it take to pay back Major's initial investment in the machine?

89.  Eval Co. is evaluating a major capital project to determine its economic feasibility. The following data have been accumulated:

90.  Eval Co. uses straight-line depreciation for capital investments of this type.Excerpts from present value tables showed the following: Using the information above, which one of the following is the payback period in years for this project? (Ignore income tax.)

91.  Which one of the following is a strength of the payback method of evaluating an investment project?

92.  A company invested in a new machine that will generate revenues of $35,000 annually for seven years. The company will have annual operating expenses of $7,000 on the new machine. Depreciation expense, included in the operating expenses, is $4,000 per year. The expected payback period for the new machine is 5.2 years. What amount did the company pay for the new machine?

93.  Which one of the following approaches to capital project evaluation is primarily concerned with the relative economic ranking of projects?

94.  Capital budgeting is concerned with capital investments that have which one of the following characteristics?

95.  Which of the following statements is correct regarding the payback method as a capital budgeting technique?

96.  The discounted payback period approach to project evaluation is better than the payback period approach because I. It considers the time value of money. II. It is useful in evaluating the liquidity of a project. III. It uses expected cash flows.

97.  A company purchases an item for $43,000. The salvage value of the item is $3,000. The cost of capital is 8%. Pertinent information related to this purchase is as follows: What is the discounted payback period in years?

98.  Which of the following statements concerning the discounted payback period method of evaluating capital projects is/are correct? I. It is useful in evaluating the liquidity of a project.II. It measures total project profitability.III. It results in a longer computed payback period than does the undiscounted payback period method.

99.  Which one of the following is the capital budgeting evaluation approach that determines the number of periods required for the discounted cash inflows of a project to equal the discounted cash outflows?

100.                      Which of the following statements concerning the discounted payback period approach to project evaluation is/are correct? I. It takes into account cash flows received over the entire life of the project. II. Any project economically acceptable under the payback period approach will be acceptable under the discounted payback period approach. III. Any project economically acceptable under the discounted payback period approach will be acceptable under the payback period approach.

101.                      Which one of the following methods of evaluating potential capital projects would take into account depreciation expense that was non-deductible for tax purposes?

102.                      Which of the following statements concerning the accounting rate of return approach to evaluating capital projects is/are correct? I. It considers the entire life of a project. II. It considers the time value of money. III. It assumes that the incremental net income is the same each year.

103.                      Lin Co. is buying machinery it expects will increase average annual operating income by $40,000. The initial increase in the required investment is $60,000, and the average increase in required investment is $30,000. To compute the accrual accounting rate of return, what amount should be used as the numerator in the ratio?

104.                      Phillips Company is considering the acquisition of a new machine that would cost $66,000, has an expected life of 6 years, and an expected salvage value of $16,000. The company expects the machine to provide annual incremental income before taxes of $7,200. Phillips has a tax rate of 30%. If Phillips uses average values in its calculations, which one of the following will be the average accounting rate of return on the machine?

105.                      Tam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment is acquired. The equipment's estimated useful life is 10 years, with no residual value, and it would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. Present value of an annuity of 1 at 12% for 10 periods is 5.65. Present value of 1 due in 10 periods at 12% is .322.Accrual accounting rate of return based on initial investment is

106.                      Given a 10% discount rate with cash inflows of $3,000 at the end of each year for five years and an initial investment of $11,000, what is the net present value?

107.                      A company is considering two projects, which have the following details: Which project would provide the largest after-tax cash inflow?

108.                      Net present value as used in investment decision-making is stated in terms of which of the following options?

109.                      Which of the following is an advantage of net present value modeling?

110.                      A corporation is considering purchasing a machine that costs $100,000 and has a $20,000 salvage value. The machine will provide net annual cash inflows of $25,000 per year and has a six-year life. The corporation uses a discount rate of 10%. The discount factor for the present value of a single sum six years in the future is 0.564. The discount factor for the present value of an annuity for six years is 4.355. What is the net present value of the machine?

111.                      Salem Co. is considering a project that yields annual net cash inflows of $420,000 for years 1 through 5, and net cash inflow of $100,000 in year 6. The project will require an initial investment of $1,800,000. Salem's cost of capital is 10%. Present value information is present below: What was Salem's expected net present value for this project?

112.                      Yarrow Co. is considering the purchase of a new machine that costs $450,000. The new machine will generate net cash flow of $150,000 per year and net income of $100,000 per year for five years. Yarrow's desired rate of return is 6%. The present value factor for a five-year annuity of $1, discounted at 6%, is 4.212. The present value factor of $1, at compound interest of 6% due in five years, is 0.7473. What is the new machine's net present value?

113.                      The discount rate is determined in advance for which of the following capital budgeting techniques?

114.                      The following information pertains to Krel Co.'s computation of net present value relating to a contemplated project: Discounted expected cash inflows        $1,000,000 Discounted expected cash outflows            700,000 Net present value is:

115.                      Oak Company bought a machine that they will depreciate on a straight-line basis over an estimated life of seven years. The machine has no salvage value. They expect the machine to generate after-tax net cash inflows from operations of $110,000 in each of the seven years. Oak's minimum rate of return is 12%. Information on present value factors is as follows: Assuming a positive net present value of $12,000, what was the cost of the machine?

116.                      A project's net present value, ignoring income tax considerations, is normally affected by the

117.                      Smarti Co. has determined the following data in connection with its evaluation of a capital investment project: Smarti uses straight-line depreciation for capital investments of this type. Excerpts from present value tables showed the following: Using the above information, which one of the following is the present value of total estimated future cash inflows and savings? (Ignore income taxes.)

118.                      The calculation of depreciation is used in the determination of the net present value of an investment for which of the following reasons?

119.                      Tam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment is acquired. The equipment's estimated useful life is 10 years, with no residual value, and would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. Present value of an annuity of 1 at 12% for 10 periods is 5.65. Present value of 1 due in 10 periods at 12% is .322. Net present value is

120.                      An investment in a new product will require an initial outlay of $20,000. The cash inflow from the project will be $4,000 a year for the next six years. The payment will be received at the end of each year. What is the net present value of the investment at 8% using the correct factor from below?

121.                      A project should be accepted if the present value of cash flows from the project is:

122.                      How are the following used in the calculation of the internal rate of return of a proposed project? Ignore income tax considerations.

123.                      What is an internal rate of return?

124.                      If income taxes are ignored, which of the following methods of evaluating capital investment projects includes the use of depreciation expense?

125.                      Which of the following statements about investment decision models is true?

126.                      Which of the following metrics equates the present value of a project's expected cash inflows to the present value of the project's expected costs?

127.                      Which of the following events would decrease the internal rate of return of a proposed asset purchase?

128.                      Which of the following decision-making models equates the initial investment with the present value of the future cash inflows?

129.                      Neu Co. is considering the purchase of capital equipment that has a positive net present value based on Neu's 12% hurdle rate. The internal rate of return would be:

130.                      A client wants to know how many years it will take before the accumulated cash flows from an investment exceeds the initial investment, without taking the time value of money into account. Which of the following financial models should be used?

131.                      Which of the following phrases defines the internal rate of return on a project?

132.                      Which of the following capital budgeting techniques, if any, implicitly assumes that all cash inflows are immediately reinvested to earn a return for the company?

133.                      In evaluating the economic feasibility of a capital project, the discount rate (or hurdle rate of return) must be determined in advance when using the:

134.                      Which of the following characteristics represent an advantage of the internal rate of return technique over the accounting rate of return technique in evaluating a project? I. Recognition of the project's salvage value. II. Emphasis on cash flows. III. Recognition of the time value of money.

135.                      Which of the following rates is most commonly compared to the internal rate of return to evaluate whether to make an investment?

136.                      Tam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment is acquired. The equipment's estimated useful life is 10 years, with no residual value, and it would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. Present value of an annuity of 1 at 12% for 10 periods is 5.65. Present value of 1 due in 10 periods at 12% is .322. In estimating the internal rate of return, the factors in the table of present values of an annuity should be taken from the columns closest to

137.                      When estimating cash flow for use in capital budgeting, depreciation is

138.                      Polo Co. requires higher rates of return for projects with a life span greater than five years. Projects extending beyond five years must earn a higher specified rate of return. Which of the following capital budgeting techniques can readily accommodate this requirement?

139.                      Which of the following limitations is common to the calculations of payback period, discounted cash flow, internal rate of return, and net present value?

140.                      If it is determined that a project investment is expected to generate $1.20 in present value for each $1.00 invested, which one of the following was most likely used to reach that conclusion?

141.                      Disco is considering three capital projects that have the following costs and net present values (NPV): Which one of the projects, if any, is not economically feasible?

142.                      What is the formula for calculating the profitability index of a project?

143.                      Which of the following is a limitation of the profitability index?

144.                      Disco is considering three capital projects that have the following costs and net present values (NPV): Using the profitability index, which project, if any, would be ranked as the most desirable?

145.                      Which one of the following represents the formula used to calculate the profitability index for ranking projects?

146.                      Which one of the following methods of evaluating investment projects is most likely to be used to rank projects competing for limited capital investment funds?

147.                      Which of the following statements is correct regarding financial decision making?

148.                      Which one of the following methods of evaluating investment projects is most likely to be least acceptable for making project ranking decisions?

149.                      Which of the following methods should be used if capital rationing needs to be considered when comparing capital projects?

150.                      The term "capital structure" refers to which one of the following?

151.                      The term "financial structure" refers to which one of the following?

152.                      Bonds Payable, which mature in 10 years, would be included as part of a firm's

153.                      Which one of the following statements concerning the relationship between the concepts and measurement of capital structure and financial structure of a firm is correct?

154.                      Which one of the following most likely would not be considered when computing the weighted average cost of capital?

155.                      Which of the following uses of accounts receivable, if either, would be considered short-term financing?

156.                      Which of the following can provide short-term financing?

157.                      Short-term financing is normally concerned with financing for which one of the following lengths of time?

158.                      Which of the following statements concerning short-term financing is/are correct? I. Accounts payable can provide short-term financing. II. Accounts receivable can provide short-term financing. III. Inventory can provide short-term financing.

159.                      Which one of the following generally is not an advantage associated with the use of trade accounts payable and accrued accounts payable for short-term financing needs?

160.                      On January 23, Inco Company received from one of its suppliers a statement with terms of "2/10, n/30." Because the statement was misfiled, it was not located for payment until February 5. On which one of the following dates should the bill be paid?

161.                      Alpha Company borrowed $20,000 from High Bank, giving a one-year note. The terms of the note provided for 6% interest and required a 10% compensating balance. Which one of the following is the effective rate of interest on the loan?

162.                      Which one of the following provides a source of spontaneous financing for a firm?

163.                      Which one of the following forms of short-term financing is least likely to be considered a spontaneous source of funding?

164.                      Which one of the following forms of short-term financing is least likely to be restricted as to use of proceeds?

165.                      An amount that a bank requires a firm to maintain in a demand deposit account with the bank in return for a line of credit or loan is called:

166.                      Which one of the following typically is not a characteristic of commercial paper?

167.                      Which one of the following is a formal legal commitment to extend credit up to some maximum amount to a borrower over a stated period?

168.                      Which one of the following would an importer of goods from a new foreign supplier most likely use to assure the supplier of payment?

169.                      Which one of the following is a form of inventory secured loan in which the inventory is placed under the control of an independent third party?

170.                      Nexco, Inc. is considering factoring its accounts receivable. Factorco, Inc. has offered the following terms for accounts receivable due in 30 days: If Nexco plans to factor $200,000 of accounts receivable due in 30 days, which one of the following is the amount it will receive from Factorco at the time the accounts are factored?

171.                      Nexco, Inc. is considering factoring its accounts receivable. Factorco, Inc. has offered the following terms for accounts receivable due in 30 days: If Nexco factors $200,000 of its accounts receivable due in 30 days with Factorco and, during that 30 days, $10,000 of those accounts receivable are reversed because the related goods were return or allowances were granted, which one of the following is the amount that Nexco will receive from Factorco at the end of the 30 day period?

172.                      Which one of the following forms of collateral is most commonly used as security for short-term loans?

173.                      Po Co. plans to use its inventory as collateral for a short-term loan. Which one of the following types of loan agreements with its lender would provide Po Co. the most flexibility in the use of the inventory it pledges as collateral?

174.                      The weighted average cost of capital for a firm is determined by its cost of

175.                      Which of the following statements concerning long-term financing is/are correct? I. Long-term financing consists of sources that constitute capital structure. II. Long-term financing consists of sources on which the weighted-average cost of capital is based. III. Long-term financing consists only of equity sources of capital.

176.                      Which one of the following would not be considered a means of long-term financing?

177.                      Components of long-term financing would be part of

178.                      Long-term financing is normally concerned with financing for which one of the following lengths of time?

179.                      Which of the following long-term notes would best facilitate financial leverage for the borrowing firm?

180.                      Under which of the following described lease terms would the lessee be responsible during the term of the lease for executory costs associated with the leased asset?

181.                      What would be the primary reason for a company to agree to a debt covenant limiting the percentage of its long-term debt?

182.                      Which of the following statements concerning the leasing of an asset is/are correct? I. If the net present value of purchasing an asset is not positive, then leasing the asset should not be considered as an alternative. II. In a net-net lease, the lessee is responsible for executory costs and residual value of the leased asset.

183.                      Which one of the following bond issues, with different terms and stated rates of interest, would have the highest interest rate risk, all other things being equal?

184.                      The market price of a bond issued at a premium is equal to the present value of its principal amount

185.                      Which one of the following is a contract that states the terms of a bond issued by a corporation?

186.                      Which of the following types of bonds is most likely to maintain a constant market value?

187.                      Which of the following statements concerning debenture bonds and secured bonds is/are correct? I. Debenture bonds are likely to have a greater par value than comparable secured bonds. II. Debenture bonds are likely to be of longer duration than comparable secured bonds. III. Debenture bonds are more likely to have a higher coupon rate than comparable secured bonds.

188.                      In which one of the following areas is preferred stock most likely to differ from common stock?

189.                      A company recently issued 9% preferred stock. The preferred stock sold for $40 a share, with a par of $20. The cost of issuing the stock was $5 a share. What is the company's cost of preferred stock?

190.                      Whipco has determined that its pre-tax cost of preferred stock is 12%. If its tax rate is 30%, which one of the following is its after-tax cost of preferred stock?

191.                      Which of the following statements concerning preferred stock is/are generally correct? I. Requires dividends be paid. II. Grants ownership interest. III. Grants voting rights.

192.                      Allen issues $100 par value preferred stock that is selling for $101 per share, on which the firm has to pay an underwriting fee of $5 per share sold. The stock is paying an annual dividend of $10 per share. Allen's tax rate is 40%. Which one of the following is the cost of preferred stock financing to Allen?

193.                      What impact will the issuing of new preferred stock have on the following for the issuing entity?

194.                      The stock of Fargo Co. is selling for $85. The next annual dividend is expected to be $4.25 and is expected to grow at a rate of 7%. The corporate tax rate is 30%. What percentage represents the firm's cost of common equity?

195.                      Which of the following statements concerning common stock is/are generally correct? I. Requires dividends be paid. II. Grants ownership interest. III. Grants voting rights.

196.                      Bander Co. is determining how to finance some long-term projects. Bander has decided it prefers the benefits of no fixed charges, no fixed maturity date, and an increase in the credit-worthiness of the company. Which of the following would best meet Bander's financing requirements?

197.                      Which of the following formulas should be used to calculate the historic economic rate of return on common stock?

198.                      The cost of debt most frequently is measured as

199.                      Why would a firm generally choose to finance temporary assets with short-term debt?

200.                      Which of the following statements concerning the use of short-term financing by an entity is/are correct? I. Short-term financing generally offers greater financial flexibility than long-term financing. II. Short-term financing generally has a lower interest rate than long-term financing. III. Short-term financing generally has a lower risk of illiquidity than long-term financing.&am

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