Session 6 learning concepts exercise
The International Finance Corporation (IFC) is
a unit of the World Bank charged with the responsibility of providing capital to multinational
corporations and others involved in international trade.
1. The marginal principle of retained earnings means that each potential project to be
financed by retained earnings must provide a higher rate of return than the
stockholders can achieve after paying taxes on the distributed dividends.
2. The residual th
With regard to interest rates and bond prices, it can be said that
a 1% change in interest rates will cause a greater change in long-term bond prices than shortterm prices.
a 1% change in interest rates will cause a greater change in short-term bond price
Floating rate bonds provide which one of the following advantages?
A lower risk for the issuing corporation
A higher initial rate received by the investor
Higher tax advantages for the investor than a conventional bond
A fixed market value for the investo
Concept Learning Exercise 2
1. Assume a $6,500 investment and the following cash flows for two alternatives.
Under the payback method, which of the following could be concluded?
Investment X should be selected.
2. An asset fitting into the 7-year MACRS ca
Debreu Beverages has an optimal capital structure that is 70% common equity,
20% debt, and 10% preferred stock. Debreu's pretax cost of equity is 9%. Its pretax
cost of preferred equity is 7%, and its pretax cost of debt is also 5%. If the
corporate tax r