Pro forma financial statements for a proposed project should:

I. be compiled on an aggregate basis.

II. exclude all the incremental cash flows related to the project.

III. generally exclude interest expense.

IV. include all project-related fixed asset acquisitions and disposals.

II, III, and IV onlyIII and IV onlyI, II, III, and IVI, II, and IV onlyI and II only

9. Billingsley United declared a $0.20 a share dividend on Thursday, March 16. The dividend will be paid on Monday, April 30 to shareholders of record on Tuesday, April 15. Which one of the following is the exdividend date? Thursday, April 26 Monday, April 14 Friday, April 27 Friday, April 11 Tuesday, March 14 10. After _______________, a business firm ceases to exist as a going concern. divestiture share repurchase reorganization capital restructuring liquidation 11. A firm's overall cost of equity is: I. generally higher than the firm's WACC for a levered firm. II. affected by changes in the market risk premium. III. not dependent upon the growth rate and risk level of the firm. IV. generally higher than the firm's aftertax cost of debt. V. inversely related to changes in the firm's tax rate. I, II, IV and V only I, III and V only II, III, IV and V only I, II, III, IV and V only I, II and IV only 12. Automatic dividend reinvestment plans: I. allow stockholders reinvest part or all of the dividends to which they are entitled. II. sometimes grant shareholders the privilege of purchasing additional shares at a discounted price. III. help shareholders create their own homemade dividend policies. IV. help make corporate dividend policies irrelevant to individual stockholders. I, II, III and IV II, III and IV only II only III only I, II and IV only 13. The _______________ is the average of a firm's cost of equity and aftertax cost of debt that is weighted based on the firm's capital structure. structured cost of capital subjective cost of capital reward to risk ratio weighted average cost of capital weighted capital gains rate 14. The dividend growth model: is not as reliable as the estimated rate of growth. does not consider the risk that future dividends may vary from their estimated values. uses standard deviation to measure the systematic risk of a firm. applies even when a firm does not pay dividends. can only be used if historical dividend information is available. 15. Financial distress costs should include I. direct bankruptcy costs II. indirect bankruptcy costs III. direct costs related to being financially distressed, but not bankrupt IV. indirect costs related to being financially distressed, but not bankrupt I and II only III and IV only I only I, II, III, and IV III only 16. Which one of the following statements is correct? Interest expense should always be included as a cash outflow when analyzing a project. The depreciation tax shield creates a cash inflow for a project. The opportunity cost of a companyowned building that is going to be used in a new project should be in cluded as a cash inflow to the project. Project analysis should only include the cash flows that affect the income statement. A project must create a positive operating cash flow without affecting sales. 17. Yesterday, O.L. Jones & Co. paid a $0.58 quarterly cash per share to its shareholders. This payment was made in the normal course of business out of the firm's net income. Thus, this cash payment is referred to as a ________________________. regular cash dividend extra cash dividend liquidating dividend special dividend repurchase 18. Which one of the following is an example of a sunk cost? $2,500 of lost sales due to an item was out of stock none of the given costs is a suck cost. $10,000 project that must be given up if a similar project is accepted. $2,800 increase in comic book sales if a store commences selling puzzles $3,500 reduction in a store's current novel sales if it starts selling magazines. 19. Which of the following statements related to cash dividends are correct? I. Extra cash dividends can be repeated in the future but there will be no guarantee that it will repeat. II. A dividend is never a liability until it has been declared. III. If a firm has paid regular quarterly dividends for at least five consecutive years it is legally obligated to continue doing so. IV. Regular cash dividends reduce paidin capital. V. The dividend yield expresses the annual dividend as a percentage of current stock price. I, II and V only II, IV and V only I, II and IV only I, II, III, IV and V I, II, III and IV only 20. Pro forma financial statements for a proposed project should: I. be compiled on an aggregate basis. II. exclude all the incremental cash flows related to the project. III. generally exclude interest expense. IV. include all projectrelated fixed asset acquisitions and disposals. II, III, and IV only I, II, and IV only I, II, III, and IV III and IV only I and II only 21. Which of the following are a project's cash inflows? Ignore any tax effects. I. increase in accounts payable II. increase in inventory III. decrease in accounts receivable IV. depreciation expense based on MACRS V. equipment acquisition I and II only I, III, IV and V only I, II and III only I and III only I, IV and V only 22. If you ignore taxes and costs, a stock repurchase will: I. increase the total assets of a firm. II. decrease the earnings per share. III. reduce the total debt of a firm. IV. reduce the total equity of a firm. II, III, and IV only III only II and IV only IV only I, III, and IV only