A firm plans to retire outstanding bonds
Hi Sarah…Please review attached. Thank you.
1) A firm plans to retire outstanding bonds in the next planning period. The statements that will be
affected are the
a. pro forma balance sheet and cash budget
b. pro forma income statement and pro forma balance sheet
c. cash budget and statement of retained earnings
d. pro forma income statement, pro forma balance sheet, cash budget, and statement of retained earnings
2) The amount of money that would have to be invested today at a given interest rate over a specified
period in order to equal a future amount is called
a. present value
b. future value
c. future value interest factor
d. present value interest factor
3) The future value of a dollar ________ as the interest rate increases and ________ the farther in the
future an initial deposit is to be received.
a. increases; increases
b. decreases; increases
c. decreases; decreases
d. increases; decreases
4) The purpose of adding an asset with a negative or low positive beta is to
a. reduce risk
b. increase profit
c. reduce profit
d. increase risk
5) When evaluating projects using internal rate of return,
a. the discount rate and magnitude of cash flows do not affect internal rate of return
b. projects having higher early-year cash flows tend to be preferred at lower discount rates
c. projects having higher early-year cash flows tend to be preferred at higher discount rates
d. projects having lower early-year cash flows tend to be preferred at higher discount rates
6) The cost to a corporation of each type of capital is dependent upon
a. the risk-free rate of each type of capital plus the business risk and the financial risk of the firm
b. the risk-free rate of each type of capital plus the business risk of the firm
c. the risk-free rate of each type of capital plus the financial risk of the firm
d. the risk-free rate of bonds plus the business risk of the firm
1
affected are the
a. pro forma balance sheet and cash budget
b. pro forma income statement and pro forma balance sheet
c. cash budget and statement of retained earnings
d. pro forma income statement, pro forma balance sheet, cash budget, and statement of retained earnings
2) The amount of money that would have to be invested today at a given interest rate over a specified
period in order to equal a future amount is called
a. present value
b. future value
c. future value interest factor
d. present value interest factor
3) The future value of a dollar ________ as the interest rate increases and ________ the farther in the
future an initial deposit is to be received.
a. increases; increases
b. decreases; increases
c. decreases; decreases
d. increases; decreases
4) The purpose of adding an asset with a negative or low positive beta is to
a. reduce risk
b. increase profit
c. reduce profit
d. increase risk
5) When evaluating projects using internal rate of return,
a. the discount rate and magnitude of cash flows do not affect internal rate of return
b. projects having higher early-year cash flows tend to be preferred at lower discount rates
c. projects having higher early-year cash flows tend to be preferred at higher discount rates
d. projects having lower early-year cash flows tend to be preferred at higher discount rates
6) The cost to a corporation of each type of capital is dependent upon
a. the risk-free rate of each type of capital plus the business risk and the financial risk of the firm
b. the risk-free rate of each type of capital plus the business risk of the firm
c. the risk-free rate of each type of capital plus the financial risk of the firm
d. the risk-free rate of bonds plus the business risk of the firm
1
Answers
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