QRB 501 FINAL EXAM 2 – QUESTIONS AND ANSWERS

QRB 501 Final Exam Questions and Answers One disadvantage of the corporate form of business ownership is the which one of the following statements is false? A firm has a debt-equity ratio of .64, a pretax cost of debt of 8.5 percent, and a required return on assets of 12.6 percent. What is the cost of equity if you ignore taxes? Which one of these statements is correct concerning the cash cycle? You plan to invest $6,500 for three years at 4 percent simple interest. What will your investment be worth at the end of the three years? Which one of the following statements about preferred stock is true? A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every: The costs of avoiding a bankruptcy filing by a financially distress firm are classify as ______ costs. All else held constant, interest rate risk will increase when the time to maturity: What is the present value of $6,811 to be received in one year if the discount rate is 6.5 percent? All else equal, the contribution margin must increase as qrb 501 final exam The process of planning and managing a firm’s long-term assets is …..: Book value The cash flow resulting from a firm’s ongoing, normal business activities is refer to as the: The underlying assumption of the dividend growth model is that a stock is worth qrb 501 final exam Under the ____ method, the underwriter buys the securities for less than the offering price and accepts the risk of not selling the issue, while under the _____ method, the underwriter does not purchase the shares but merely acts as an agent. Futures contracts contrast with forward contracts by qrb 501 final exam Lois is purchasing an annuity that will pay $5,000 annually for 20 years, with the first annuity payment made on the date of purchase. What is the value of the annuity on the purchase date ….a discount rate of 7 percent? Which one of the following is an example of a nondiversifiable risk? An interest rate that is compounded monthly but is express as if the rate were compounded annually, is _____ rate. The market price of a bond increases when the: The higher the inventory turnover, the: Which one of these is a correct definition? Which term defines the tax rate that applies to the next dollar of taxable income ……? An efficient capital market is one in which qrb 501 final exam Ratios that measure a firm’s ability to pay its bills over the short run without undue stress are …….. A project has an initial cost of $2.50. The cash inflows are $0, $500, $900, and $700 for years 1 to 4, respectively. What is the payback period? The excess return you earn by moving from a relatively risk-free investment to a risky investment is …….: The primary goal of financial management is to: qrb 501 final exam The discount rate that makes the net present value of an investment exactly equal to zero is called the: