BA 301 Quiz 3 - BA 301 Quiz 3 1.Which one of the following...

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BA 301 Quiz 3 1. Which one of the following factors promotes a well-functioning securities market? A. Lack of transparency in financial statements B. No accountability of borrowers and investors C. Contracts are difficult to enforce D. Secure property rights E. Market players do not bear consequences of their decisions 2. A general rule used by companies in determining whether or not to make an investment is: A. Invest when there is a positive expected return on investment. B. Invest when net present value of cash flows is negative. C. Invest when cost of capital is equal to expected return on investment. D. Invest when expected return on investment is greater than cost of capital. E. Invest when cost of capital is greater than return on investment. 3. Which of the following is a real-world example of a bad capital budgeting investment? A. The Alaskan Pipeline B. Motorola’s investment in the Iridium Project C. Boeing’s investment in the 777. D. Disney’s investment in The Lion King E. Microsoft’s investment in Windows 2000. 4. Which of the following is an ADVANTAGE of using debt financing as compared to equity financing? A. Equity financing leads to financial distress. B. Interest paid on debt financing is tax deductible. C. Debt financing cannot lead to financial distress. D. With debt financing, the company does not incur a fixed financing obligation E. There is no cost of debt for any company 5. Which of the following can help a firm improve its Cash Conversion Cycle? A. Make collections from customers slower B. Make payments to suppliers slower C. Increase accounts receivables as a percentage of sales D. Decrease inventory turnover E. Decrease the net income of the company 6. What is the cost of capital for the company listed below? Debt: $60,000
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Cost of debt: 8% Equity: $40,000 Cost of equity: 12% Tax rate: 40% A. 7.68% B. 8% C. 6.72% D. 6.2% E. 9.6% 7. According to the financial life cycle, which of the following is the first source of capital for a business? A.
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This note was uploaded on 09/01/2010 for the course BA 301 taught by Professor Woodridgeandgray during the Spring '10 term at Pennsylvania State University, University Park.

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BA 301 Quiz 3 - BA 301 Quiz 3 1.Which one of the following...

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