Objective type questions on financial decisions

Assignment Help Finance Basics

Reference no: EM1311039

1) The purpose of the stock split is to

A. issue additional shares

B. increase the dividend

C. reduce the price of the stock

D. reduce trading activity

2) When determining the after __________ tax cost of a bond, the face value of the issue must be adjusted to the net proceeds amounts by considering

A. the risk

B. the floatation costs

C. the approximate returns

D. the taxes

3) The corporation has 10 million dollars in 10% preferred stock outstanding and a 40% tax rate. The amount of earnings before interest and taxes (EBIT require to pay the preferred dividends is

A. 1 million dollars

B. $400,000

C. $600,000

D. 1,666,667

4) The cost of each type of capital depends on the

A. risk-free cost of that type of funds.

B. business risk of the firm

C. financial risk of the firm

D. all of the above

5) The repurchase of stock _____________ the earnings per share and _______________ the market price of stock

A. increase, increase

B. decrease, decrease

C. increase, decrease

D. decrease, increase

6) The investment opportunity scheduled combined with the weighted marginal costs of capital indicates

A. those projects that a firm should select

B. those projects that will result in the highest cash flows

C. which projects are acceptable given the firm's cost of capital

D. which combination of projects will fit within the firm's capital budget

7) A corporation borrows 1 million dollars at 10% annual rate of interest. The firm has 40% tax rate. The yearly, after tax cost of this debt is

A. $40,000

B. $60,000

C. $100,000

D. $166,667

Reference no: EM1311039

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