FREE AND STUDY GAMES ABOUT FINANCE EXAM

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FREE AND STUDY GAMES ABOUT FINANCE EXAM

QUESTIONS

Actual Qs and Ans Expert-Verified Explanation

This Exam contains:

-Guarantee passing score -45 Questions and Answers -format set of multiple-choice -Expert-Verified Explanation

Question 1: Finding a firm's overall cost of equity is difficult because _____.

Answer:

there is no way of directly observing the return that the firm's equity investors require on their investment Question 2: Including preferred stock in the WACC adds the term:

Answer:

(P/V) × RP

Question 3: The cost of capital is an appropriate name since a project must earn enough to pay those who ______ the capital.

Answer:

supply Question 4: The market value cost of debt is often Blank______ the book value cost of debt.

Answer:

similar to

Question 5: To apply the dividend growth model to a particular stock, you need to assume that the firm's ___ will grow at a constant rate.

Answer:

dividend Question 6: The most well-known approach to company performance evaluation is the _____ method.

Answer:

economic value added Question 7: In reality, most firms cover the equity portion of their capital spending with ___.

Answer:

internally generated cash flow

Question 8: A firm's overall cost of capital will include both its cost of

capital and equity capital.

Answer:

debt Question 9: The WACC is the weighted average of the cost of equity and the _____.

Answer:

aftertax cost of debt Question 10: The return an investor in a security receives is ______ the cost of the security to the company that issued it.

Answer:

equal to

Question 11: WACC is used to discount Blank______.

Answer:

Cash Flow

Question 12: Finding a firm's overall cost of equity is

(straightforward/difficult).

Answer:

difficult

Question 13: The return an investor in a security receives is equal to the cost of the security to the company that issued it.True false question.True

Answer:

true Question 14: Economic value added (EVA) is a means of evaluating corporate performance.

Answer:

True

Question 15: Which of the following are tax-deductible to the firm?

Answer:

Coupon interest paid on bonds

Question 16: Select all that apply

A firm's cost of debt can be ___.

Answer:

obtained by checking yields on publicly traded bonds

estimated easier than its cost of equity

obtained by talking to investment bankers

Question 17: The growth rate of dividends can be found using _____.

Answer:

security analysts' forecasts

historical dividend growth rates Question 18: A project should only be accepted if its return is above what is ___.

Answer:

required by investors

Question 19: Which of the following is true?

Answer:

A company can deduct interest paid on debt when computing taxable income.Question 20: WACC was used to compute the following project NPVs: Project A = $100, Project B = -$50, Project C = -$10, Project D = $40. Which projects should the firm accept?

Answer:

A and D Question 21: The most appropriate weights to use in the WACC are the ______ weights.

Answer:

market value Question 22: Dividends paid to common stockholders ______ be deducted from the payer's taxable income for tax purposes.

Answer:

cannot Question 23: Which of the following methods for calculating the cost of equity ignores risk?

Answer:

The dividend growth model

Question 24: The best way to include flotation costs is to ___.

Answer:

add them to the initial investment

Question 25: What does WACC stand for?

Answer:

Weighted average cost of capital Question 26: The issuance costs of bonds and stocks are referred to as ______ costs.

Answer:

flotation