Day 33 Flashcards
1
Q
Equation: After-Tax Cost of Debt
A
= Pretax Cost of Debt × (1 - Tax Rate)
MCQ-05247
2
Q
Equation: Cost of Preferred Stock
A
= Preferred Stock Dividends ÷ Net Proceeds of Preferred Stock
= (Par × Rate) ÷ Net Proceeds of Preferred Stock
= Outflows ÷ Inflows
MCQ-05180
3
Q
What is the formula for calculating the profitability index of a project?
A
Divide the Present Value of the Annual After-Tax Cash Flows by the original Cash invested in the project
Profitability Index = Present Value of Net Future Cash Inflows ÷ Present Value of Net Initial Investment
= PV of Net Future Cash Inflows ÷ PV Net Initial Investment
MCQ-06625
4
Q
What is a characteristic of a flexible budget?
A
Provides budgeted numbers for various activity levels
MCQ-05862
