Question $1$

Question text

The risk that remains in a stock portfolio after efforts to diversify is known as unique risk.

Question $1$Select one:

a$.$

True

b$.$

False

Question $2$

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Dividends paid are treated as a financing activity on the statement of cash flows.

Question $2$Select one:

a$.$

True

b$.$

False

Question $3$

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Project cost of capital and company cost of capital are synonymous terms.

Question $3$Select one:

a$.$

False

b$.$

True

Question $4$

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If investors believe a company will have the opportunity to make very profitable investments in the future, they will pay more for the company's stock today.

Question $4$Select one:

a$.$

False

b$.$

True

Question $5$

Question text

The interest tax shield generated by a project's actual equity financing is accounted for by using the after$-$tax cost of equity in the WACC.

Question $5$Select one:

a$.$

False

b$.$

True

Question $6$

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Stock market indexes are found in several countries outside of Canada.

Question $6$Select one:

a$.$

False

b$.$

True

Question $7$

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An increase in a firm's debt ratio will have no effect on the required rate of return for equity holders.

Question $7$Select one:

a$.$

True

b$.$

False

Question $8$

Question text

Depreciation charge is a cash payment.

Question $8$Select one:

a$.$

False

b$.$

True

Question $9$

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Diversification decreases the variability of both unique and market risk.

Question $9$Select one:

a$.$

False

b$.$

True

Question $10$

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The statement of cash flows shows the firm's cash inflows and outflows from operations as well as from its investments and financing activities.

Question $10$Select one:

a$.$

False

b$.$

True

Question $11$

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Apple Computer is well known for its product innovations. Access to financing was vital to Apple's growth and profitability.

Question $11$Select one:

a$.$

False

b$.$

True

Question $12$

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Market risk can be eliminated in a stock portfolio through diversification.

Question $12$Select one:

a$.$

False

b$.$

True

Question $13$

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One reason for the difference between profits and cash is that the cost of capital equipment is spread over the forecast life.

Question $13$Select one:

a$.$

True

b$.$

False

Question $14$

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Systematic risk is faced by all common stock investors.

Question $14$Select one:

a$.$

True

b$.$

False

Question $15$

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The higher the times interest earned ratio, the higher the interest expense.

Question $15$Select one:

a$.$

False

b$.$

True

Question $16$

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The company cost of capital is the expected rate of return that investors demand from the company's assets and operations.

Question $16$Select one:

a$.$

True

b$.$

False

Question $17$

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The reinvestment of cash back into the firm's operations is an example of a flow of savings to investment.

Question $17$Select one:

a$.$

True

b$.$

False

Question $18$

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An expenditure on new capital equipment is a cash payment.

Question $18$Select one:

a$.$

True

b$.$

False

Question $19$

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The mix of a company's short$-$term financing is referred to as its capital structure.

Question $19$Select one:

a$.$

True

b$.$

False

Question $20$

Question text

Interest tax shields are available to the firm on debt and preferred stock but not on common equity.

Question $20$Select one:

a$.$

True

b$.$

False