For the following, indicate whether the statement is true or false. 34. XYZ Corp
ID: 2349994 • Letter: F
Question
For the following, indicate whether the statement is true or false.34. XYZ Corporation's cost of debt is less than its cost of equity. Therefore, XYZ should continue to issue more debt (instead of equity) in order to finance proposed capital projects.
35. The current ratio is a less strict evaluation of liquidity than the quick ratio.
36. For US corporations, the cost of debt is always less than the cost of equity.
37. A credit facility refers to the lending institution that provides corporate financing.
38. The present value of cash cannot be determined.
39. For any present value factor .abcd, the corresponding future value factor (for the same number of periods and at the same rate) would be .abcd divided by the number of years.
40. As the cost of capital increases, the NPV rule becomes more difficult to fulfill.
41. Book value is not necessarily a measure of how much an asset is worth today.
42. Annuity tables can be used when payments vary from year to year.
43. If an investment appreciates 100% in 10 years, its compound growth rate is approximately 10% per year.
44. Sarbanes Oxley legislation is relatively cost-free to implement.
45. Boeing's cash cycle is very long because of the time required to manufacture aircraft.
46. Stock dividends and bond interest payments are both legal obligations of the corporation.
47. The NPV is always a positive number because you cannot discount a future value to a pv less than zero.
48. Start-up tech companies generaly issue debt because their cost of equity is too high.
49. A dollar received today is worth more than a dollar to be received tomorrow.
50. CFO's are concerned with three major management topics: capital budgeting, capital structure, and capital maximization.
Explanation / Answer
34. XYZ Corporation's cost of debt is less than its cost of equity. Therefore, XYZ should continue to issue more debt (instead of equity) in order to finance proposed capital projects. Q.34 True 35. The current ratio is a less strict evaluation of liquidity than the quick ratio. Q.35 True current assets / current liabilities is less strict because quick ratio is current assets minus inventory / current liabilities 36. For US corporations, the cost of debt is always less than the cost of equity. Q.36 False 37. A credit facility refers to the lending institution that provides corporate financing. Q.37 True 38. The present value of cash cannot be determined. Q.38 False 39. For any present value factor .abcd, the corresponding future value factor (for the same number of periods and at the same rate) would be .abcd divided by the number of years. Q.39 TRUE 40. As the cost of capital increases, the NPV rule becomes more difficult to fulfill. Q.40 False 41. Book value is not necessarily a measure of how much an asset is worth today. Q.41 True 42. Annuity tables can be used when payments vary from year to year. Q.42 True 43. If an investment appreciates 100% in 10 years, its compound growth rate is approximately 10% per year. Q.43 False 44. Sarbanes Oxley legislation is relatively cost-free to implement. Q.44 False 45. Boeing's cash cycle is very long because of the time required to manufacture aircraft. Q.45 True 46. Stock dividends and bond interest payments are both legal obligations of the corporation. Q.46 False 47. The NPV is always a positive number because you cannot discount a future value to a pv less than zero. Q.47 False 48. Start-up tech companies generaly issue debt because their cost of equity is too high. Q.48 True 49. A dollar received today is worth more than a dollar to be received tomorrow. Q.49 True 50. CFO's are concerned with three major management topics: capital budgeting, capital structure, and capital maximization. Q50. False Capital budgeting, capital structure and working capital management