Considered capital budgeting decision

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Reference no: EM133578696

Questions

1. Which of the following would be considered a capital budgeting decision?

a. Walmart purchases inventory for resale to customers. b. Apple sells bonds and uses the proceeds to repurchase stock. c. Goldman Sachs obtains short-term loans to finance day to day operations. d. Pfizer develops a new therapy and brings it to market.

2. Advantages of privately placing debt include all of the following EXCEPT:

a. speed b. reduced placement costs c. restrictive covenants d. flexibility

3. Government bonds have lower yield to maturity than do corporate bonds of the same maturity because the ________ premium is lower for government bonds.

a. interest rate risk b. inflation c. default d. maturity

4. McDonald's stock currently sells for $123. It's expected earnings per share are $5.12. The average P/E ratio for the industry is 24. If investors expected the same growth rate and risk for McDonald's as for an average firm in the same industry, it's stock price would:

a. stay about the same b. rise c. fall d. there is not enough information

5. CEOs naming friends to the board of directors and paying them more than the norm is an example of the:

a. agency problem b. preemptive

Reference no: EM133578696

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