BFIN 300 Practice- Questions with Correct
Verified Answers
The discount rate that makes the net present value of an investment exactly equal to zero is
the
Internal Rate of Return
Ratios that measure how effectively a firm's management uses its assets and equity to
generate bottom line net income are known as _____________ ratios
Profitability
Efficient Market Hypothesis
All securities in an efficient market are zero net present value investments
Sunk costs include any cost that
Has previously been incurred and cannot be changed
An increase in total assets...
Must be offset by an equal increase in liabilities and stockholders' equity.
All else constant, a bond will sell at _________ when the yield to maturity is __________ the
coupon rate
A premium; less than
Efficient financial markets fluctuate continuously because
The markets are continually reacting to new information
, _____ refers to the firm's interest payments less any net new borrowing
Cash flow to creditors
Payback is frequently used to analyze independent projects because
It is easy and quick to calculate
A business created as a distinct legal entity composed of one or more individuals or entities
is a
Corporation
The ________________ breaks down return on equity into three component parts
Du Point Identity
Risk that affects at most a small number of assets is called
Unsystematic Risk
The cash flows of a project should
Include all incremental costs, including opportunity costs
The rate at which a stock's price is expected to appreciate (or depreciate) is called the
_____ yield
Capital Gains
The internal rate of return for a project will increase if
The initial cost of the project can be reduced
A bond has a market price that exceeds its face value. Therefore, the
Verified Answers
The discount rate that makes the net present value of an investment exactly equal to zero is
the
Internal Rate of Return
Ratios that measure how effectively a firm's management uses its assets and equity to
generate bottom line net income are known as _____________ ratios
Profitability
Efficient Market Hypothesis
All securities in an efficient market are zero net present value investments
Sunk costs include any cost that
Has previously been incurred and cannot be changed
An increase in total assets...
Must be offset by an equal increase in liabilities and stockholders' equity.
All else constant, a bond will sell at _________ when the yield to maturity is __________ the
coupon rate
A premium; less than
Efficient financial markets fluctuate continuously because
The markets are continually reacting to new information
, _____ refers to the firm's interest payments less any net new borrowing
Cash flow to creditors
Payback is frequently used to analyze independent projects because
It is easy and quick to calculate
A business created as a distinct legal entity composed of one or more individuals or entities
is a
Corporation
The ________________ breaks down return on equity into three component parts
Du Point Identity
Risk that affects at most a small number of assets is called
Unsystematic Risk
The cash flows of a project should
Include all incremental costs, including opportunity costs
The rate at which a stock's price is expected to appreciate (or depreciate) is called the
_____ yield
Capital Gains
The internal rate of return for a project will increase if
The initial cost of the project can be reduced
A bond has a market price that exceeds its face value. Therefore, the
