Finance-Week 9 Quiz- The cost of capital is a combination of a firm's payments to the different sources of capital..
Question 1;1. The cost of capital is a combination of a firm's payments to the different sources of capital funding. We call this;a.;the average cost of capital.;b.;the weighted average cost of capital.;c.;the transfer price.;d.;the discount rate.;1 points;Question 2;1. The cost of capital for a firm is;a.;the price of productive inputs that the firm pays.;b.;the interest rate on borrowed funds and returns for equity.;c.;is a sunk cost.;d.;determined by profits.;1 points;Question 3;1. Stocks are a;a.;form of debt.;b.;form of debt and equity.;c.;form of equity.;d.;just a way for firms to borrow money.;1 points;Question 4;1. Bonds generally;a.;have lower value on secondary markets.;b.;have more risk than stock.;c.;have less risk than stock.;d.;pay a fixed proportion of profits.;1 points;Question 5;1. The price of a bond and the market interest rate (the discount rate);a.;are inversely related;b.;are directly related.;c.;are linked by the capital asset pricing model.;d.;are positively related.;1 points;Question 6;1. Capital structure refers to;a.;the ratio of equity to debt.;b.;the ratio of common stock to preferred stock.;c.;the ratio of cash to current liabilities;d.;the ratio of debt to equity.;1 points;Question 7;1. The cost of equity capital to a firm is equal to;a.;a risk-free interest rate.;b.;the Treasury bill rate minus an equity premium.;c.;the dividend payments.;d.;a risk-free rate plus an equity premium.;1 points;Question 8;1. You should invest in a new project if;a.;the present value of all costs is negative.;b.;the NPV is positive.;c.;the expected revenues are positive.;d.;none of these choices.;1 points;Question 9;1. If the discount rate increases;a.;investment also increases.;b.;NPV does not change.;c.;NPV falls.;d.;NPV rises.;1 points;Question 10;1. NPV calculation needs to include;a.;only variable costs of a project.;b.;all costs related to a project.;c.;only sunk costs of a project.;d.;a risk-free rate as the discount rate.;1 points;Question 11;1. The corporate form of business allows owners a more efficient way to manage risk relative to;a.;proprietorships.;b.;partnerships.;c.;other non-corporate forms of business.;d.;all of these choices.;1 points;Question 12;1. Stockholders manage risk by;a.;electing the board of directors.;b.;having lots of bonds in their portfolios.;c.;appointing day-to-day managers.;d.;diversifying their portfolios.;1 points;Question 13;1. The market process can be thought of as;a.;a path to discovery of information.;b.;an inflexible process.;c.;a theoretical concept that reveals little useful information.;d.;none of these choices.;1 points;Question 14;1. In general, the structure of a business firm;a.;seems more like a central planning agency than a market.;b.;looks like a flat network.;c.;is largely determined by legal considerations.;d.;looks like a market.;1 points;Question 15;1. Internal markets;a.;are used to determine a transfer price between different units and activity centers.;b.;are most commonly relegated to cafeteria services and vending.;c.;are part of a firm's horizontal network.;d.;none of these choices.;1 points;Question 16;1. Transfer prices should be set to so;a.;to maximize profits for only one unit in a multi-unit firm.;b.;allow arbitrage with the external market place.;c.;to maximize profits for the overall firm.;d.;none of these choices.;1 points;Question 17;1. BP has;a.;only used external markets.;b.;used internal markets successfully to reduce emissions.;c.;used internal markets to replace vendor relationships.;d.;none of these choices.;1 points;Question 18;1. Market prices;a.;are limited in their information content.;b.;contain all available information.;c.;contain only past information.;d.;none of these choices.
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