Multiple Choice Answers

The Time Value of Money Principle says to __________. A. look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it. B. look for profitable opportunities to arrange project financing or limit partnership financing for an asset you wish to purchase. C. recognize that the cancellation option in a lease is valuable to the lessee. D. use discounted cash flow analysis to compare the costs and benefits of leasing, relative to the alternative of borrowing and buying.

The wholesale price for Captain John’s is $1.70 per loaf, and the variable cost of production is $0.80 per loaf. What is the contribution margin? A. $2.50 B. $1.70 C. $0.90 D. cannot tell

The wholesale price for Captain John’s is $0.612 per loaf, and the variable cost of production is $0.387 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 4.5 million loaves in the next five years. What additional revenues minus expenses will be generated from expansion? A. $1,012,500 B. $1,000,500 C. $912,500 D. $1,102,000

The wholesale price for Captain John’s is $3.00 per loaf. One million loaves will be sold in the next year. What is the contribution margin? A. $3,000,000 B. $3,000,000 minus fixed costs C. $3.00 D. cannot tell

Due to asymmetric information, the market fears that a firm issuing securities will do so when the stock is ___________. A. caught up in a bear market. B. overvalued. C. undervalued. D. being sold by insiders.

Pursuing valuable ideas is the best way __________. A. to restrain your spending. B. to get yourself in trouble. C. to achieve extraordinary returns. D. to avoid risk.

54) Which of the following statements is true? A. Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing from outside sources. B. Hard capital rationing refers to the rationing imposed internally by the firm. C. A post audit is a set of procedures for evaluating a capital budgeting decision after the fact. D. all of these

__________ says to forecast the firm’s cash flows, and analyze the incremental cash flows of alternative decisions. A. The Principle of Incremental Benefits B. The Time Value of Money Principle C. The Signaling Principle D. The Principle of Risk-Return Trade-Off

___________ says to use both bottom-up and top-down processes to increase the chance of uncovering valuable ideas. A. The Principle of Two-Sided Transactions B. The Principle of Comparative Advantage C. The Behavioral Principle D. The Principle of Valuable Ideas

__________ says to use common industry practices as a good starting place for the planning process. A. The Principle of Self-Interested Behavior B. The Principle of Valuable Ideas C. The Principle of Incremental Benefits D. The Behavioral Principle