BUS 401 Principles Of Finance Week 4 Quiz

A finance quiz assessing fundamental financial principles from Week 4.

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BUS 401 PRINCIPLES OF FINANCE WEEK 4 QUIZ
1. A plant may remain operating when sales are depressed _________ (Points :1)
If the selling price per unit exceeds the variable cost per unit
To help the local economy
In an effort to cover at least some of the variable cost
Unless variable costs are zero when production is zero
2. A corporation with very high growth prospects and many positive NPV projects to fund may want to
increase its dividend based on _______ (Points :1)
The tax bias against capital gains.
The residual dividend theory
The information effect
The very low agency costs of the corporation
3. Financing a portion of a firm’s assets with securities bearing a fixed rate of return in hopes of
increasing the return to stockholders refers to ______ (Points : 1)
Business risk
Financial leverage
Operating leverage
Combined leverage
4. In perfect capital markets there ______ (Points : 1)
Is no informational content assigned to a particular dividend policy.
Are no income taxes
Are no flotation costs
All of the above
5. Low dividends may increase stock value according to the ______ (Points : 1)
Bird in the hand theory
Information effect
Impact of agency costs
Tax bias in favor of capital gains
6. A high degree of variability in a firm’s earnings before interest and taxes refers to _______ (Points : 1)
Business risk
Financial risk
Financial leverage
7 The market value of a leveraged firm is equal to the market value of an unleveraged firm
a. plus the present value of tax shields minus the present value of financial distress costs plus the
present value of agency costs.
b. minus the present value of tax shields minus the present value of financial distress costs minus the
present value of agency costs.
c. plus the present value of tax shields minus the present value of financial distress costs minus the
present value of agency costs.
d. plus the present value of tax shields plus the present value of financial distress costs plus the
present value of agency costs.
8 All of the following may influence a firm’s dividend payment except:
Investment opportunities.
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Document Details

University
Ashford University
Subject
Finance

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