Business Finance - Study Mode

Show All Answers

[#366] Which of the following concepts deals with discounted cash flows?

(A) Time value of debentures

(B) Time value of money

(C) Time value of bonds

(D) Time value of treasury bills

Correct Answer

(B) Time value of money

[#367] Which of the following are the main features of Zero Coupon Bonds? 1. They are called deep discount bonds. 2. The price paid by investors is less than their face value. 3. The bonds are redeemed at par.

(A) 1 and 3

(B) 1 and 2

(C) 2 and 3

(D) 1, 2 and 3

Correct Answer

(D) 1, 2 and 3

[#368] Which combination of the following represents the assumptions of the Walter's dividend model? 1.The company has a very long or perpetual life. 2. All earnings are either reinvested intemally or distributed as dividend. 3. There is no floatation cost for the company. 4. Cost of capital of the company is constant. Select the correct one:

(A) 1, 2 and 3

(B) 2, 3 and 4

(C) 1, 2 and 4

(D) 1, 3 and 4

Correct Answer

(A) 1, 2 and 3

[#369] Which one of the following is not the internal factor affecting the weighted average cost of capital of a firm?

(A) Investment policy of the firm

(B) Capital structure of the firm

(C) Dividend policy followed

(D) Market risk premium for the firm

Correct Answer

(D) Market risk premium for the firm

[#370] Which of the following statements is most correct?

(A) For small companies, long-term debt is the principal source of external financing

(B) The current assets of the typical manufacturing firm account for over half of its total assets

(C) Strict adherence to the maturity matching approach to financing would call for all current assets to be financed solely with current liabilities

(D) Similar to capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months

(E) The future value of an annuity due to greater than an otherwise identical ordinary annuity

(F) A reduction in the discount rate will increase the future value of an otherwise identical cash flow stream

(G) Continuous compounding will result in a higher present value relative to an otherwise identical investment compounded monthly at the same nominal rate

(H) The FVIFA (i%, N periods) equals the sum of the PVIF (i%, n) for n = 1 to N periods

Correct Answer

(B) The current assets of the typical manufacturing firm account for over half of its total assets
(E) The future value of an annuity due to greater than an otherwise identical ordinary annuity