1 What is the invested capital given the following Accounts receivable $50,000 current assets $200,000 total assets $700,000 shareholders equity $440,000 accounts payable $10,000 short term debt $100,000 and long term debt $150,000 a $700,000 b $740,000 c $690,000 d $590,000 2 Which of the followin...

1 C Invested capital shortterm debt longterm debt shareholders equity 100000 150000 440000 690000 2 ...

1. What is the invested capital given the following? Accounts receivable = $50,000; current assets = $200,000;...

Question:

1. What is the invested capital given the following? = $50,000; current assets = $200,000; total assets = $700,000; shareholders’ equity = $440,000; = $10,000; short-term debt = $100,000; and long-term debt = $150,000.
a. $700,000
b. $740,000
c. $690,000
d. $590,000

2. Which of the following statements is true?
a. Equity dollars are different from debt dollars.
b. ROI is not affected by business risk.
c. Each new dollar invested in a firm earns an incremental and different ROI.
d. ROE is affected by financial risk.

3. Which of the following statements is false?
a. The slope of the financial leverage line is (1 + debt-equity ratio).
b. ROE = ROI if a firm is 100 percent financed by debt.
c. The intercept of the financial leverage line is the debt-equity ratio times the after-tax cost of debt.
d. One of the break-even points is when two financial strategies have the same ROE.

4. Which of the following statements of rules of financial leverage is false?
a. The use of debt normally decreases the expected ROE.
b. The higher the debt-equity ratio, the steeper the financial leverage line.
c. Debt financing increases the risk to common shareholders.
d. Debt financing increases the chances of financial distress.

5. The EPS-EBIT line
a. Is steeper if there are more shares outstanding.
b. Has a slope equal to EBIT (1 − T)/#.
c. Has an intercept equal to RDB (1 − T)/#.
d. Indicates that if EBIT = 0, EPS = −RD B(1 − T)/#.

6. Which of the following is not an assumption of M&M’s irrelevance theorem?
a. Two firms exist with different levels of debt.
b. There is no tax.
c. Transaction costs are minimal.
d. There is no risk of costly bankruptcy.

7. Which of the following will result in a decrease in the weighted average (WACC)?
a. A decrease in TC
b. An increase in the cost of debt
c. An increase in the A decrease in the weight of equity

8. In the M&M irrelevance world, which of the following is false?
a. The increases as the debt-equity ratio increases.
b. If the expected ROI of a project is greater than the WACC, the share price will go up.
c. The firm’s objective is to increase the market value of the share price, not EPS.
d. The WACC always increases as the debt-equity ratio increases.

9. What is the for a levered firm given the following? KU = 10%; KD = 5%; T = 20%; and D/SL = 0.6.
a. 13%
b. 10.6%
c. 12.4%
d. 14.8%

10. Which of the firms below is the most likely to raise debt in the capital market?
a. A profitable firm that has a risky underlying business
b. A large and profitable firm with stable earnings and cash from operations
c. A less profitable firm that has a non-risky business and cyclical cash flows
d. A small firm that has seen its share price decrease in the past

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...