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Finance-Week 9 Quiz- The cost of capital is a combination of a firm's payments to the different sources of capital..




Question;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.


Paper#51956 | Written in 18-Jul-2015

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