Economics > QUESTIONS & ANSWERS > FIN 100 Sophia Final Milestone,100% CORRECT (All)

FIN 100 Sophia Final Milestone,100% CORRECT

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You passed this Milestone 17 questions were answered correctly. 8 questions were answered incorrectly. 1 Company A Company B Market Value of Equity $700,000 $900,000 Market Value of Debt $300,000 $200,000 Cost of Equity 8% 10% Cost of Debt 1.5% 3% Tax Rate 30% 25% Based solely on their current weighted average cost of capital, which company should pursue an investment opportunity with an expected return of 7%?  Only Company B  Both Company A and Company B  Only Company A  Neither Company A nor Company B CONCEPT The WACC 2 Preparing a cash flow forecast helps a company to avoid __________.  opportunity costs  higher financing costs  liquidity  net losses CONCEPT Building a Cash Budget 3 What must be forecasted first in order to prepare the pro forma income statement?  Cost of goods sold  Sales  Expenses  Net income CONCEPT Forecasting the Income Statement 4 Select the statement that correctly explains the relationship between interest rates and present or future value.  Assuming other variables stay the same, if the interest rate decreases, the future value of an investment increases.  Assuming other variables stay the same, if the interest rate decreases, the present value of an investment decreases.  The interest rate and the future value of an investment are inversely related.  Assuming other variables stay the same, if the interest rate increases, the future value of an investment increases. CONCEPT Additional Detail on Present and Future Values 5 Calculate a company's total leverage given the following information:  Net income = $80,000  Revenue = $120,000  Variable costs = $25,000  1.19  Cannot calculate without knowing degree of financial leverage  1.14  Cannot calculate without EPS data CONCEPT Thinking About Financial Leverage 6 You would like to have $10,000 in an account after eight years’ time. If the account earns 2.5% compounded interest yearly, how much would you have to deposit today?  $9,464  $8,207  $8,333  $9,765 CONCEPT Present Value, Single Cash Flows 7 What is the recent trend of algorithmic trading criticized for?  Being too transparent  Over-extending credit  Increasing market volatility  Improving market liquidity CONCEPT Trends and Issues in Finance 8 If a portfolio regularly falls twice as much as a benchmark index rises, the portfolio's beta coefficient is __________.  0.5%  -2.0%  -0.5%  2.0% CONCEPT

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