When the net present value is negative, the internal rate of return is __________ the cost of capital
When the net present value is negative, the
internal rate of return is __________ the cost of capital.
Greater Than
Greater than or equal to
Less than
Equal to
The IRR
Shows the graphical relationship between a project’s NPV and
cost of capital.
Is the return that causes the NPV to be zero.
Is the return that causes that NPV to be positive
Measures the firm and project’s required rate or return.
Which one of the following capital-budgeting
evaluation techniques is based on finding a discount rate which causes the net
present value to be zero?
Net present value
Internal rate of return
Profitability index
payback
An examination of a firm’s opportunities,
strengths, threats and weaknesses is often referred to by the following
acronym:
WOTS
OSTW
SWOT
TWOS
Capital budgeting is
The process of
identifying, evaluating, and implementing a firm’s investment opportunities
The process of
identifying, evaluating and implementing a firm’s objectives.
The process of
identifying, evaluating, and implementing a firm’s strategic plans.
The process of identifying,
evaluating and implementing a firm’s financing requirements.
The relevant cash
flows of a project do not include which one of the following?
Incremental after-tax
cash flows
Cannibalization effects
Opportunity costs
Sunk costs
The stage in the
capital budgeting process in which projects that are accepted must be
executed in a timely fashion is called the _____________ stage.
Follow-up.
Selection.
Identification.
Implementation.
The
capital-budgeting process starts with which one of the following stages:
Development
Identification
Implementation
Selection
The corporate planning
tool that develops project plans that fit well with the firm’s plans is often
referred to by the following acronym:
MOGS
SMOG
OMGS
GOMS
When the net present
value for a project is negative, the internal rate of return is _________ the
cost of capital.
Greater than
Greater than or
equal to
Less than
Equal to
Corporate debt as a
percentage of GDP grew from around ______ in 1970 to nearly ______ in 2007.
35%; 50%
40%; 55%
45%; 60%
50%; 60%
The internal and
sustainable growth rate relationships suggest that there are three measurable
influences on growth. These include all of the following except:
Asset Policy
Dividend policy
Profitability
The firm’s capital structure
The initial impact
of increasing the use of debt is to:
Lower the cost of
capital
Lower the weight of
the debt component
Increase the cost of
capital
Lower the cost of
retained earnings
Which of the
following is a different concept from the other three?
Required rate of
return
Cost of capital
Discount rate
Net profit margin
When retained
earnings are used up and new common stock is issued, we know that the cost
of:
Equity has increased
Equity has dropped
Equity is unaffected
Both common and preferred
stock are affected
The firm’s target
capital structure is consistent with which of the following?
Minimum risk
Maximum earnings per
share
Minimum weighted
average cost of capital
Minimum cost of
equity
A firm’s degree of
combined leverage can be measured as degree of operating leverage __________
the degree of financial leverage:
Plus
Minus
Times
Divided by
What should be the
relation between the target capital structure for a firm and the firm’s
optimum capital structure?
Target and optimum
catial structures should be the same.
Target capital structure
is more conservative overall
Target capital
structure contains more debt.
Target capital
structure excludes preferred stock.
The cost of debt:
Is typically higher
than the cost of preferred stock
Must be adjusted to
an after-tax cost
Is higher than
component cost because corporations can deduct 70 percent of the interest expense
Of the components
shown below, which is least likely to be of value in calculating the cost of
preferred stock?
Flotation costs per
share
Book value of a
preferred share
Dividends per share
Initial market price
per share
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