Question 56

Which of the following decision rules uses an arbitrary cutoff and does not consider the time value of money?

Select one:

a. Payback period

b. Discounted payback

c. Average accounting return

d. Internal rate of return

e. Net present value

Question 57

Your company is considering the purchase of a fleet of cars for $200,000. It can borrow at 6%. The cars will be used for four years. At the end of four years they will be worthless. You call a leasing agent and find that the cars can be leased for $55,000 per year. The corporate tax rate is 34% and the cars belong in CCA class 10 (a 30% class), what is the net advantage to leasing?

Select one:

a. $5,399

b. $1,802

c. $3,434

d. $3,961

e. $1,134

Question 58

In most industries, planning beyond the period of one year is not very useful.

Select one:

True

False

Question 59

Diversification will NOT reduce the market risk of your portfolio.

Select one:

True

False

Question 60

Generally, bankruptcy costs have no impact on a firms decision to increase debt financing.

Select one:

True

False