Day 31 Flashcards

1
Q

Equation: net cost of debt

A

= effective interest rate × net effect of tax

MCQ-05247

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2
Q

Equation: cost of preferred stock

A

= Preferred Stock Dividend (Par × Rate) ÷ Net Proceeds of Preferred Stock

MCQ-05180

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3
Q

What is needed to estimate the cost of equity capital?

A
  1. Current dividends per share (D)
  2. Expected growth rate in dividends (g)
  3. Current market price per share of Common stock (P)

MCQ-03920

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4
Q

Equation: Profitability Index of a project

A

= Present Value of Net Future Cash Inflows ÷ Present Value of Net Initial Investment

MCQ-06625

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5
Q

Define: Mixed Costs

A

Includes both fixed and variable costs

MCQ-03465

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6
Q

What are the characteristics of a flexible budget?

A
  • Adjusts the budget amounts for different levels of activity
  • Identifies volume components of variances from planned activity

MCQ-05862

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7
Q

Define: Operating Budgets

A

Describe the plan for revenue and expenses and the supporting schedules that go with them

Ex: Sales, Materials, Labor, Overhead, Production

MCQ-04004

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8
Q

Define: Capital Budgets

A

Plan for purchase of Capital assets

Note: Capital Budgets only affect Operational Budgets through their subsequent effect on expense via depreciation

MCQ-04004

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9
Q

Equation: Investment Turnover

A

= Sales ÷ Average Investment

MCQ-06659

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10
Q

What would decrease the NPV?

A

Increase the Discount Rate

MCQ-03797

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11
Q

What are period Costs under variable method?

A
  1. Variable SG&A
  2. Fixed SG&A
  3. Fixed Overhead

MCQ-07735

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12
Q

When developing a Capital budget, what input would be most helpful?

A

Profit center equipment requests

MCQ-04832

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