BUS 401 – W3 QuizA+

1.

Question :

The appropriate cash flows for evaluating a corporate investment decision are:

Student Answer:

incremental additional cash flows.

marginal after-tax cash flows.

incremental after-tax cash flows.

investment after-tax cash flows.

Instructor Explanation:

The answer can be found in Section 6.1: How to Compute Cash Flows.

Points Received:

1 of 1

Comments:

Question 2.

Question :

The appropriate cash flows for evaluating a corporate investment decision are:

Student Answer:

incremental additional cash flows.

marginal after-tax cash flows.

incremental after-tax cash flows.

investment after-tax cash flows.

Instructor Explanation:

The answer can be found in Section 7.1: Capital Budgeting Methods.

Points Received:

1 of 1

Comments:

Question 3.

Question :

Debt financing is called leverage because, like a lever in mechanics, it:

Student Answer:

makes the company stronger.

magnifies the influence a company has.

has a magnifying effect on financial performance.

can lift a company out of mediocre performance.

Instructor Explanation:

The answer can be found in Section 8.1: Perfect Capital Markets.

Points Received:

1 of 1

Comments:

Question 4.

Question :

The irrelevance of capital structure in perfect capital markets helps us because:

Student Answer:

if something is irrelevant, we can ignore it.

it applies to real-world capital markets.

it simplifies a complex subject.

it shows us which assumptions, when relaxed, may make capital structure relevant.

Instructor Explanation:

The answer can be found in Section 8.1: Perfect Capital Markets.