Q22:

A.

Ignoring taxes, which of the following will be associated with cash inflow(s) to be generated by Rainbow Food, Inc. in a proposed investment project?

I. a payment of wages

II. an equipment acquisition

III. a decrease in inventory

IV. a decrease in accounts payable

V. a decrease in accounts receivable

Multiple Choice

• III and V only

• I, III, IV and V only

• I and II only

• I, II and III only

• I, IV and V only

B.

In estimating American Shipping's _____________, we calculate it as the average of the firm's cost of equity and aftertax cost of debt, both of which are weighted based on the firm's capital structure.

Multiple Choice

• weighted average cost of capital

• structured cost of capital

• reward to risk ratio

• subjective cost of capital

• weighted capital gains rate

C.

Sunshine Airline's ____________ in two months will indicate that the firm will no longer exist in its industry after that.

Multiple Choice

• capital restructuring

• dividend payment

• reorganization

• liquidation

• share repurchase

D.

From what we have learned about the concept of unbiased forward rate condition, we know that the current forward rate can be used as a ________________

Multiple Choice

• predictor of the future spot rate at the equivalent point in time.

• relationship between the future spot rates of two currencies at an equivalent point in time.

• condition where the spot rate is expected to remain constant over a period of time.

• guarantee of a future spot rate at one point in time.

• condition where a future spot rate is equal to the current spot rate.

Note: Only final answers needed. Explanations not required.