Practice Class Test 2

Practice Class Test 2 - Ch Chapters 4 - 6 Review Questions...

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h t 4 Chapters 4 - 6 Review Questions
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1. When determining the cost of capital, the financing sources that should be included are: A) accounts payable and accruals B) short-term debt (i.e. short-term bank loans) ) et income available to common shareholders before corporate taxes C) net income available to common shareholders before corporate taxes have been paid D) long-term debt, preferred equity and common equity. ) ll of the choices given above E) all of the choices given above 2. The internal rate of return (IRR) is that discount rate which equates the present value of expected future cash flows with: A) the present value of net returns B) the immediate capital investment C) the present value of future receipts D) the depreciated value of the old assets less the cost of the new assets E) none of the choices given above
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3. In which one of the following situations will a firm in a perfectly competitive market earn profits? A) Marginal revenue > average variable costs B) Marginal revenue > average cost ) verage cost > Marginal cost C) Average cost > Marginal cost D) Average cost > average revenue E) Average revenue > average variable cost 4. Which one of the following statements is true about the differences between long-term debt and common equity? A) Long-term debt is ownership in a firm but common equity is not. B) Creditors have voting power while stockholders do not. C) Periodic payments associated with either class of security are tax eductible for the issuer deductible for the issuer. D) Interest payments on long-term debt are promised while dividend payments on common stock are not. ) ondholders can also own common equity but not vice versa E) Bondholders can also own common equity, but not vice versa.
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5. When investment alternatives are mutually exclusive, A) they can only be accepted if capital funds are limited. B) the selection of one alternative excludes the selection of all other alternatives.
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This note was uploaded on 01/22/2012 for the course MIME 310 taught by Professor Bilido during the Winter '08 term at McGill.

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Practice Class Test 2 - Ch Chapters 4 - 6 Review Questions...

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