Fin 370 Exam 4 Questions and Answers
Graded A+
Which of the following statements is CORRECT? - Correct answer-A good
example of a sunk cost is money that a banking corporation spent last year to
investigate the site for a new office, then expensed that cost for tax purposes, and
now is deciding whether to go forward with the project
Which of the following statements is CORRECT? - Correct answer-If equipment is
expected to be sold for more than its book value at the end of a project's life, this
will result in a profit. In this case, despite taxes on the profit, the end-of-project
cash flow will be greater than if the asset had been sold at book value, other things
held constant.
The optimal capital structure has been achieved when the: - Correct answer-debt-
equity ratio results in the lowest possible weighted average cost of capital.
The proposition that a firm borrows up to the point where the marginal benefit of
the interest tax shield derived from increased debt is just equal to the marginal
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
Graded A+
Which of the following statements is CORRECT? - Correct answer-A good
example of a sunk cost is money that a banking corporation spent last year to
investigate the site for a new office, then expensed that cost for tax purposes, and
now is deciding whether to go forward with the project
Which of the following statements is CORRECT? - Correct answer-If equipment is
expected to be sold for more than its book value at the end of a project's life, this
will result in a profit. In this case, despite taxes on the profit, the end-of-project
cash flow will be greater than if the asset had been sold at book value, other things
held constant.
The optimal capital structure has been achieved when the: - Correct answer-debt-
equity ratio results in the lowest possible weighted average cost of capital.
The proposition that a firm borrows up to the point where the marginal benefit of
the interest tax shield derived from increased debt is just equal to the marginal
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
