The interest on corporate bonds is typically paid:

	semiannually.
	annually.
	quarterly.
	monthly.

The yield to maturity on a bond:

	is fixed in the indenture.
	is lower for higher-risk bonds.
	is the required return on the bond.
	is generally equal to the coupon interest rate.

If current market interest rates rise, what will happen to the value of outstanding bonds?

	It will rise.
	It will fall.
	It will remain unchanged.
	There is no connection between current market interest rates and the value of outstanding bonds.

If a project has a profitability index greater than 1,

	the npv will also be positive.
	the irr will be higher than the required rate of return.
	the present value of future cash flows will exceed the amount invested in the project.
	All of these.

Relevant incremental cash flows include:

	sales captured from the firm's competitors.
	retained sales that would have been lost to new competing products.
	incremental sales brought to the firm as a whole.
	All of these.

Which of the following is an example of a sunk cost?

	Overhead costs that are associated with a project
	Interest expense associated with a project
	Market study expenses incurred in order to decide if a firm should accept a project
	Income taxes associated with a project
	Depreciation expenses associated with a project

Depreciation expenses affect capital budgeting analysis by increasing:

	taxes paid.
	incremental cash flows.
	the initial outlay.
	working capital.

Most of the variables used in forecasting cash flows are known with certainty.

True

False

Which of the following are usually known with a high level of confidence at the beginning of a project?

	The number of units that will be sold.
	The price per unit that will result in the desired number of units sold.
	Tax rates and depreciation rates.
	None of these.

Real options can have the effect of:

	increasing a project's NPV.
	reducing a project's risk.
	gaining information about future opportunities.
	All of these.

The CAPM approach is used to determine the cost of:

	debt.
	preferred stock.
	common equity.
	long term funds.

Which of the following is NOT a component of a firm's capital structure?

	Preferred stock
	Bonds
	Common stock
	Accounts payable
	Retained earnings

The capital structure that minimizes the weighted average cost of capital will also:

	maximize EPS for any given level of EBIT.
	minimize the value of the firm.
	minimizes bankruptcy costs.
	maximize the price per share of common stock.