FIN 515 26 Questions

FIN 515 26 Questions - 1. Which of the following would...

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Which of the following would increase the likelihood that a company would increase its debt ratio, other things held constant? A) An increase in costs incurred when filing for bankruptcy. B) An increase in the corporate tax rate. C) An increase in the personal tax rate. D) The Federal Reserve tightens interest rates in an effort to fight inflation. E) The company's stock price hits a new low. 2. A lease versus purchase analysis should compare the cost of leasing to the cost of owning, assuming that the asset purchased A) is financed with short-term debt. B) is financed with long-term debt. C) is financed with debt whose maturity matches the term of the lease. D) is financed with a mix of debt and equity based on the firm’s target capital structure, i.e., at the WACC. E) is financed with retained earnings. 3. Which of the following would be most likely to lead to a decrease in a firm’s dividend payout ratio? A) Its earnings become more stable. B) Its access to the capital markets increases. C) Its R&D efforts pay off, and it now has more high-return investment opportunities. D) Its accounts receivable decrease due to a change in its credit policy. E) Its accounts receivable decrease due to a change in its credit policy. 4. Which of the following is NOT commonly regarded as being a credit policy variable? A) Credit period. B) Collection policy. C) Credit standards. D) Cash discounts. E) Payments deferral period. 5. Which of the following assumptions is embodied in the AFN equation? A) None of the firm's ratios will change. B) Accounts payable and accruals are tied directly to sales. C) Common stock and long-term debt are tied directly to sales. D) Fixed assets, but not current assets, are tied directly to sales. E) Last year’s total assets were not optimal for last year’s sales. 6. Elephant Books sells paperback books for $7 each. The variable cost per book is $5. At current annual sales of 200,000 books, the publisher is just breaking even. It is estimated that if the authors' royalties are reduced, the variable cost per book will drop by $1. Assume authors' royalties are reduced and sales remain constant; how much more money can the publisher put into advertising (a fixed cost) and still break even? A) $600,000 B) $466,667 C) $333,333 D) $200,000 E) None of the above 7. Last year Godinho Corp. had $250 million of sales, and it had $75 million of fixed assets that were being operated at 80% of capacity. In millions, how large could sales have been if the company had operated at full capacity? A) $312.5
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FIN 515 26 Questions - 1. Which of the following would...

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