An increase in which of the following will cause a firm's sustainable growth rate to increase, all else equal?

a.

retention ratio not important

b.

debt-equity ratio

c.

profit margin

d.

total asset turnover multiple

When deciding whether or not to build a new factory, a financial manager should consider the of the related cash flows.

a.

amount and the risk, but not the timing

b.

timing, but not the risk

c.

timing and amount, but not the risk

d.

amount, the timing, and the risk

e.

amount, but not the timing

Which is of the following are reasons why financing a business through borrowing is cheaper than using equity?

a.

Debt interest cannot be offset against pre-tax profits before calculating the corporation tax bill, thus, reducing the tax paid

b.

Lenders require a lower rate of return than ordinary shareholders.

c.

Issuing and transaction costs associated with raising and servicing equity generally less than for ordinary shares.

d.

Debt financial securities present lower costs than shares because they have prior claims on annual income and in liquidation.

What is meant by the term 'sunk costs'?

a.

Costs of appraising a project's viability

b.

Costs which will not change, regardless of the decision to proceed with a project

c.

Costs that will be lost if the project is a failure

d.

Costs that have already been spent on a project