Reference no: EM133072030

1. Shareholders and creditors of a company are most likely  to have conflicts of interest if the company is proposing to:

A) Enter into a high-risk project with a potentially high rate of return

B) Change accounting practices to minimize tax payments

C) Increase the prices of its products

2. The least likely actions used to protect creditor rights are:

A. the review of company financial statements.

D. covenants.

C. indentures.

3. The cash conversion cycle of Retallik Corporation has changed from 52 days in year 1, to 56 days in year 2, to 61 days in year 3. Which conclusion is most likely?

A. The credit sales of the company decreased, and the amount of accounts receivables remained the same.

B. The increase in the inventory occurred at a slower rate than the increase in the credit purchases.

C. The cost of trade credit became lesser than the short-term finances available to the company.

4. The beta of ABC's common stock is 1.1, the dividend paid is $3.50, and the stock price is $82.00. The expected market return is 12% and the risk-free rate is 6%. The cost of equity is closest to:

A. 12.6%.

B. 13.2%.

C. 6.6%.

5. North Company has a common stock price of $72. The latest reported earnings per share were $4.80 and dividends per share were $1.60. The return on equity (ROE) is 8%. The cost of equity is closest to:

A. 7.67%.

B. 7.55%.

C. 7.46%.