17 Aug When the net present value is negative, the intern
When the net present value is negative, the internal rate of return is __________ the cost of capital.Answergreater thangreater than or equal toless thanequal toThe IRRAnswershows 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 the NPV to be positive.measures the firm and project’s required rate of 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?Answernet present valueinternal rate of returnprofitability indexpaybackAn examination of a firm’s opportunities, strengths, threats and weaknesses is often referred to by the following acronym:AnswerWOTS.OSTW.SWOT.TWOS.Capital budgeting isAnswerthe 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?Answerincremental after-tax cash flowscannibalization effectsopportunity costssunk costsThe stage in the capital budgeting process in which projects that are accepted must be executed in a timely fashion is called the _____________ stage.Answerfollow-up.selection.identification.implementation.The capital-budgeting process starts with which one of the following stages:AnswerdevelopmentidentificationimplementationselectionThe corporate planning tool that develops project plans that fit well with the firm’s plans is often referred to by the following acronym:AnswerMOGS.SMOG.OMGS.GOMS.When the net present value for a project is negative, the internal rate of return is _________ the cost of capital.Answergreater thangreater than or equal toless thanequal toCorporate debt as a percentage of GDP grew from around ______ in 1970 to nearly ______ in 2007.Answer35%; 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:Answerasset policydividend policyprofitabilitythe firm’s capital structureThe initial impact of increasing the use of debt is to:Answerlower the cost of capitallower the weight of the debt componentincrease the cost of capitallower the cost of retained earningsWhich of the following is a different concept from the other three?Answerrequired rate of returncost of capitaldiscount ratenet profit marginWhen retained earnings are used up and new common stock is issued, we know that the cost of:Answerequity has increasedequity has droppedequity is unaffectedboth common and preferred stock are affectedThe firm’s target capital structure is consistent with which of the following?Answerminimum riskmaximum earnings per shareminimum weighted average cost of capitalminimum cost of equityA firm’s degree of combined leverage can be measured as degree of operating leverage __________ the degree of financial leverage:Answerplusminustimesdivided byWhat should be the relation between the target capital structure for a firm and the firm’s optimum capital structure?AnswerTarget and optimum capital structures should be the same.Target capital structure is more conservative overall.Target capital structure contains more debt.Target capiWhen the net present value is negative, the internal rate of return is __________ the cost of capital.Answergreater thangreater than or equal toless thanequal toThe IRRAnswershows 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 the NPV to be positive.measures the firm and project’s required rate of 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?Answernet present valueinternal rate of returnprofitability indexpaybackAn examination of a firm’s opportunities, strengths, threats and weaknesses is often referred to by the following acronym:AnswerWOTS.OSTW.SWOT.TWOS.Capital budgeting isAnswerthe 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?Answerincremental after-tax cash flowscannibalization effectsopportunity costssunk costsThe stage in the capital budgeting process in which projects that are accepted must be executed in a timely fashion is called the _____________ stage.Answerfollow-up.selection.identification.implementation.The capital-budgeting process starts with which one of the following stages:AnswerdevelopmentidentificationimplementationselectionThe corporate planning tool that develops project plans that fit well with the firm’s plans is often referred to by the following acronym:AnswerMOGS.SMOG.OMGS.GOMS.When the net present value for a project is negative, the internal rate of return is _________ the cost of capital.Answergreater thangreater than or equal toless thanequal toCorporate debt as a percentage of GDP grew from around ______ in 1970 to nearly ______ in 2007.Answer35%; 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:Answerasset policydividend policyprofitabilitythe firm’s capital structureThe initial impact of increasing the use of debt is to:Answerlower the cost of capitallower the weight of the debt componentincrease the cost of capitallower the cost of retained earningsWhich of the following is a different concept from the other three?Answerrequired rate of returncost of capitaldiscount ratenet profit marginWhen retained earnings are used up and new common stock is issued, we know that the cost of:Answerequity has increasedequity has droppedequity is unaffectedboth common and preferred stock are affectedThe firm’s target capital structure is consistent with which of the following?Answerminimum riskmaximum earnings per shareminimum weighted average cost of capitalminimum cost of equityA firm’s degree of combined leverage can be measured as degree of operating leverage __________ the degree of financial leverage:Answerplusminustimesdivided byWhat should be the relation between the target capital structure for a firm and the firm’s optimum capital structure?AnswerTarget and optimum capital 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:Answeris typically higher than the cost of preferred stockmust be adjusted to an after-tax costis higher than the cost of retained earningsis the lowest component cost because corporations can deduct 70 percent of the interest expenseOf the components shown below, which is least likely to be of value in calculating the cost of preferred stock?Answerflotation costs per sharebook value of a preferred sharedividends per shareinitial market price per sharetal structure excludes preferred stock.The cost of debt:Answeris typically higher than the cost of preferred stockmust be adjusted to an after-tax costis higher than the cost of retained earningsis the lowest component cost because corporations can deduct 70 percent of the interest expenseOf the components shown below, which is least likely to be of value in calculating the cost of preferred stock?Answerflotation costs per sharebook value of a preferred sharedividends per shareinitial market price per share
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