Project is capital structure decision

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Reference no: EM132071629

1. Determining the amount of money to borrow in order to finance a 20-year project is a capital structure decision.

True

False

2. What is the present value of $1,050 payments received at the beginning of each year for the next 10 years? Assume an interest rate of 6.2%.

a. $7,914.10

b. $8,742.88

c. $8,861.29

d. $7,801.69

e. $8,130.02

3. ABC Inc. spends approximately $2 million annually to hire auditors to go over the firm's financial statements. This is an example of an indirect agency cost.

True

False

4. Given the following information: current assets = $400; fixed assets = $400; long-term debt = $455; equity = $300; sales = $470; costs = $400; tax rate = 34%. Suppose that assets and costs maintain a constant ratio to sales. What is the total external financing needed if sales increase 25%? Assume the firm pays no dividends.

a. $143.75

b. $142.25

c. $183.75

d. $167.25

e. $380.25

Reference no: EM132071629

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