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Finance 15 question timed quiz multiple choice- 1 hour timed

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Question;Question 1 of 15 1.0 PointsThe main advantage of debt financing for a firm is: I) no SEC registration is required for bond issue II) interest expense of a firm is tax deductible III) unlevered firms have higher value than levered firms A. I only B. II only C. III only D. I and III only Question 2 of 15 1.0 Points If a firm permanently borrows $100 million at an interest rate of 8%, what is the present value of the interest tax shield? (Assume that the tax rate is 30%) A. $8.00 million B. $5.6 million C. $30 million D. $26.67 million E. None of the above Question 3 of 15 1.0 Points In order to calculate the tax shields provided by debt, the tax rate used is the: A. average corporate tax rate B. marginal corporate tax rate C. average of shareholders' tax rates D. average of bondholders' tax rates Question 4 of 15 1.0 Points The reason that MM Proposition I does not hold good in the presence of corporate taxes is because: A. Levered firms pay lower taxes when compared with identical unlevered firms B. Bondholders require higher rates of return compared with stockholders C. Earnings per share are no longer relevant with taxes D. Dividends are no longer relevant with taxes Question 5 of 15 1.0 Points Assuming that bonds are sold at a fair price, the benefits from the tax shield go to the: A. managers of the firm B. bondholders of the firm C. stockholders of the firm D. lawyers of the firm Question 6 of 15 1.0 Points The pecking order theory of capital structure predicts that: A. If two firms are equally profitable, the more rapidly growing firm will borrow more, other things equal B. Firms prefer equity to debt financing C. Risky firms will end up borrowing less D. Risky firms will end up borrowing moreQuestion 7 of 15 1.0 Points Capital budgeting decisions that include both investment and financing decisions can be analyzed by: I) Adjusting the present value II) Adjusting the discount rate III) Ignoring financing mix A. I only B. II only C. III only D. I and II only Question 8 of 15 1.0 Points The after-tax weighted average cost of capital is determined by: A. Multiplying the weighted average after tax cost of debt by the weighted average cost of equity B. Adding the weighted average before tax cost of debt to the weighted average cost of equity C. Adding the weighted average after tax cost of debt to the weighted average cost of equity D. Dividing the weighted average before tax cost of debt to the weighted average cost of equityQuestion 9 of 15 1.0 Points In calculating the weighted average cost of capital, the values used for D, E and V are: A. book values B. liquidating values C. market values D. none of the above Question 10 of 15 1.0 Points A firm has a total market value of $10 million and debt has a market value of $4 million. What is the after-tax weighted average cost of capital if the before - tax cost of debt is 10%, the cost of equity is 15% and the tax rate is 35%? A. 13% B. 11.6% C. 8.75% D. None of the given answers Question 11 of 15 1.0 Points Given the following data for year-1: Profits after taxes = $20 millions, Depreciation = $6 millions,Interest expense = $4 millions, Investment in fixed assets = $12 millions,Investment in working capital = $4 millions.Calculate the free cash flow (FCF) for year-1: A. $4 millions B. $6 millions C. $10 millions D. none of the abovQuestion 12 of 15 1.0 Points Lowering debt-equity ratio of a firm can change:I) financing proportions II) cost of equity III) cost of debt IV) effective tax rate A. II and III only B. I only C. I, II, and III only D. I, II, III and IV Question 13 of 15 1.0 Points Floatation costs are incorporated into the APV framework by: A. Adding them into the all equity value of the project. B. Subtracting them from all equity value of the project. C. Incorporating them into the WACC. D. Disregarding them.Question 14 of 15 1.0 Points Subsidized loans have the effect of: A. Increasing the NPV of the loan, thereby reducing the APV. B. Decreasing the NPV of the loan, thereby reducing the APV. C. Decreasing the NPV of the loan, thereby increasing the APV. D. Increasing the NPV of the loan, thereby increasing the APV.Question 15 of 15 1.0 Points APV method is most useful in analyzing: A. large international projects B. domestic projects C. small projects D. none of the above

 

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