Question

5. The financing provided for start-up, often high-risk, private business enterprises is called:
A. Venture capital.
B. Junk bonds.
C. Flotation costs.
D. Initial public offerings.
E. Financial futures.

6. When a firm is operating with the optimal capital structure:
I. the debt-equity ratio will also be optimal.
II. the weighted average cost of capital will be at its minimal point.
III. the required return on assets will be at its maximum point.
IV. the increased benefit from additional debt is equal to the increased bankruptcy costs of that debt.
A. I and IV only
B. II and III only
C. I and II only
D. II, III, and IV only
E. I, II, and IV only

7. Which of the following is NOT a correct statement regarding break-even?
A. Accounting break-even is the sales level that results in zero project net income.
B. The cash break-even is the sales level that results in zero OCF.
C. The financial break-even is the sales level that results in an NPV greater than zero.
D. If there is depreciation, the accounting break-even will exceed the cash break-even.
E. Of the three break-evens, the financial break-even point is typically the highest.

8. Which of the following are arguments for a high dividend payout?
I. A current dividend is worth more than a future dividend.
II. Some clientele groups prefer current income.
III. Flotation costs exist in the real world.
IV. Firm's dividend payout is restricted by a bond indenture.
A. I and II only
B. II and IV only
C. I, II, and III only
D. I, II, and IV only
E. I, II, III, and IV

9. The directors of Haeger Mills prefer to keep the price of the firm's stock within a price range of $30 to $45 a share. Currently, the stock is selling for $63 a share due to the improving growth outlook of the firm. Given this, the directors are most apt to:
A. pay a special dividend.
B. implement a stock repurchase program.
C. declare a 2-for-1 stock split.
D. declare a 1-for-2 reverse stock split.
E. pay a liquidating dividend.

10. Identify each of the following dates associated with the payment of dividends by Maximum Dividends Corporation: November 17, December 8, December 17, and December 29.
A. Declaration date, ex-dividend date, record date, payment date
B. Ex-dividend date, declaration date, record date, payment date
C. Record date, declaration date, ex-dividend date, payment date
D. Declaration date, record date, payment date, ex-dividend date
E. Declaration date, payment date, record date, ex-dividend date

Answer 1