Both New York Stock Exchange and NASDAQ are examples of primary markets. True Fa

Question

Both New York Stock Exchange and NASDAQ are examples of primary markets.

True

False

1.00000 points   

QUESTION 2

Free cash flow hypothesis states that an increase in dividend should benefit the shareholders by reducing the ability of managers to pursue wasteful activities. Dividends can serve as a way for the board of directors to reduce agency costs. Therefore, firms that pay dividends from free cash flows have higher values than firms that retain free cash flows.

True

False

1.00000 points   

QUESTION 3

Companies may decide to distribute stock to shareholders of record if the company's availability of liquid cash is in short supply. Stock dividend is very similar to a stock split in that it increases the total number of shares while lowering the price of each share and does not change the market capitalization or the total value of the shares held.

True

False

1.00000 points   

QUESTION 4

If a firm total asset turnover is higher than the industry average, it indicates that the company is not generating a sufficient volume of business given its total asset investment.

True

False

1.00000 points   

QUESTION 5

The objective of the capital budgeting decision is to maximize the stock price of the company, and it is achieved by maximizing the present value of the growth opportunities.

True

False

1.00000 points   

QUESTION 6

In a regular project with an initial cash outflow and subsequent cash inflows, the net present value is negative when the cost of capital is less than IRR.

True

False

1.00000 points   

QUESTION 7

If the profitability index of a project is greater than 1, it means the NPV of the project is negative.

True

False

1.00000 points   

QUESTION 8

In a regular project with an initial cash outflow and subsequent cash inflows, the net present value decreases as the required rate of return increases.

True

False

1.00000 points   

QUESTION 9

The depreciation tax shield is calculated by T x Depreciation, where T is the firm's marginal tax rate.

True

False

1.00000 points   

QUESTION 10

An increase in NWC is treated as a cash outflow in capital budgeting cash flow estimation.

True

False

1.00000 points   

QUESTION 11

In capital budgeting cash flow estimation, sunk costs should not be included.

True

False

1.00000 points   

QUESTION 12

The standard deviation (s) of a security's return is the measure of the total risk, and the beta coefficient (ß) of a security is the measure of the systematic risk.

True

False

1.00000 points   

QUESTION 13

The slope of the capital market line is the equilibrium price of risk in terms of expected return.

True

False

1.00000 points   

QUESTION 14

A stock's total risk consists of company-specific risk, which can be eliminated by diversification, plus market risk, which cannot be eliminated by diversification.

True

False

1.00000 points   

QUESTION 15

The SML is a graphical presentation of the relationship between a security's expected return and its beta.

True

False

1.00000 points   

QUESTION 16

If a security is below the SML, a mean-variance investor would sell the security because it is overvalued.

True

False

1.00000 points   

QUESTION 17

The cost of debt is equal to one minus the marginal corporate tax rate (1 - Tc) multiplied by the yield to maturity of the outstanding debt.

True

False

1.00000 points   

QUESTION 18

The financial leverage is the extent to which fixed-income securities are used in a firm's capital structure.

True

False

1.00000 points   

QUESTION 19

MM's proposition I under no taxes implies that an issue of debt increases both the expected earnings per share (EPS) and the risk of the EPS. As a result, the stock price remains the same.

True

False

1.00000 points   

QUESTION 20

When the personal tax rate for the debt income is the same as the personal tax rate for stock income, the value of the interest tax shield is the same as when we consider only corporate taxes.

True

False

Explanation / Answer

TOO MANY QUESTIONS. AS PER POLICY, I AM SUPPOSE TO ANSWER 4, BUT I HAVE ANSWERED 8. PLEASE POST REMIANING QUESTIONS AGAIN . THANK YOU. THUMBS UP PLEASE

1. Both New York Stock Exchange and NASDAQ are examples of primary markets.

false

both are secondary markets where stocks can be bought & sold which are already issued.

2.

Free cash flow hypothesis states that an increase in dividend should benefit the shareholders by reducing the ability of managers to pursue wasteful activities. Dividends can serve as a way for the board of directors to reduce agency costs. Therefore, firms that pay dividends from free cash flows have higher values than firms that retain free cash flows.

True

IF DIVIDEND IS NOT PAID, MANAGERS MAY USE THAT MONEY TO BENEFIT THEMSELVES. SO IT IS A WASTEFUL EXPENDITURE. SAME WAY IT HELPS IN REDUCING THE AGENCY COSTS AS WELL.

3.

Companies may decide to distribute stock to shareholders of record if the company's availability of liquid cash is in short supply. Stock dividend is very similar to a stock split in that it increases the total number of shares while lowering the price of each share and does not change the market capitalization or the total value of the shares held.

True

YES BECAUSE IN STOCK SPLIT & STOCK DIVIDEND, NOTHING IA PAID IN CASH & IT IS AN APPROPRIATION OF RESERVES

4.

If a firm total asset turnover is higher than the industry average, it indicates that the company is not generating a sufficient volume of business given its total asset investment.

False

HIGHER THE ASSET TURNOVER, BETTER THE UTILISATION OF ASSETS, SO HIGHER ASSET TURNOVER IS GOOD FOR COMPANY

5.

The objective of the capital budgeting decision is to maximize the stock price of the company, and it is achieved by maximizing the present value of the growth opportunities.

True

CAPITAL BUDGETING TECHNIQUES HELP IN ANALYSING PROJECTS EFFECTIVELY. IT HELPS IN INCREASING NPV WHICH EFFECTIVELY RAISES PRICE OF STOCK.

6.

In a regular project with an initial cash outflow and subsequent cash inflows, the net present value is negative when the cost of capital is less than IRR.

False

IF COC IS LOWER THAN IRR, FIRM WILL HAVE POSITIVE NPV

7.

If the profitability index of a project is greater than 1, it means the NPV of the project is negative.

False

PROFITABILITY INDEX GREATER THAN 1 IMPLIES PRESENT VALUE OF CASHINFLOWS ARE HIGHER THAN PRESENT VALUE OF CASH OUTFLOWS, WHICH MEANS THERE IS A POSITIVE NPV

8.

In a regular project with an initial cash outflow and subsequent cash inflows, the net present value decreases as the required rate of return increases.

True

YES BECAUSE HIGHER DISCOUNTING LEADS TO LOWER AMOUNTS OF CASH INLOWS AND SOLOWER NPV

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.