Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT?
A. A project's NPV increases as the cost of capital declines.
B. A project's MIRR is unaffected by changes in the cost of capital.
C. A project's regular payback increases as the cost of capital declines.
D. A project's discounted payback increases as the cost of capital declines.
E. A project's IRR increases as the cost of capital declines.
Answer: A
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A financial holding company (FHC) is the a financial structure that can
A. own a bank and an insurance underwriting firm. B. own either an insurance underwriting firm or an insurance agency. C. own either an insurance agency or a securities agency. D. own either a securities agency or a securities underwriting firm.
The Bookstore Café is a small restaurant located in a downtown business district. It is opened for breakfast and lunch and serves simple yet nutritious meals and also sells books from the New York Times bestseller list. How would you categorize the book inventory, cooking equipment, tables, chairs, and the register?
A. As investor capital B. As current liabilities C. As assets D. As retained earnings E. As owners' equity
________ represents a short-term liability created by purchasing "on account."
A) Accounts Receivable B) Notes Payable C) Accounts Payable D) Expenses
Which of the following statements is NOT CORRECT?
A. Commercial paper can be issued by virtually any firm so long as it is willing to pay the going interest rate. B. Accruals are "free" in the sense that no explicit interest is paid on these funds. C. A conservative approach to working capital management will result in most if not all permanent assets being financed with long-term capital. D. The risk to a firm that borrows with short-term credit is usually greater than if it borrowed using long-term debt. This added risk stems from the greater variability of interest costs on short-term debt and possible difficulties with rolling over short-term debt. E. Bank loans generally carry a higher interest rate than commercial paper.