Question 1. Quiz Company has a 12 year lease, with payments of $250,000 made at the beginning of each year. If no purchase option exists, and the company is in the 40% tax bracket, what is the annual after-tax cash outflow on the lease?
- $416,667
- $250,000
- $150,000
- $100,000
Question 2. Contract terms that specify things a borrower "must"do are referred to as
- instructive covenants
- informative covenants
- negative covenants
- positive covenants
Question 3. A balloon payment is
- payment made on circus debt.
- a large front-end debt payment, followed by smaller payments.
- a large lump-sum payment at maturity of a debt.
- none of the above.
Question 4. The yield curve's typical shape suggests
- short term debt will carry higher interest rates than long term debt.
- short term debt will carry about the same rates as long term debt.
- short term debt will carry lower rates than long term debt.
- nothing about the differences in rates due to maturity difference.
Question 5. Suppose a firm is asked to pledge collateral for a term loan. Which of the following is likely to be least acceptable to the lender?
- a rare book collection owned by the company.
- the firm's inventory of industrial chemicals.
- the firm's real estate holding.
- securities held by the firm for investment.
6. In order to receive a dividend payment, an investor must own the stock
- on the announcement date
- on the date of record
- on the ex-dividend date
- on the payment date
Question 7. Place the following dates related to dividend payments in proper order:
- record date, announcement date, payment date, ex-dividend date
- announcement date, ex-dividend date, record date, payment date
- announcement date, record date, ex-dividend date, payment date
- record date, announcement date, ex-dividend date, payment date
Question 8. A company that seeks to pay a fixed dollar amount in dividends each period is following a
- constant nominal payment policy
- constant payout ratio policy
- low-regular-and extra policy
- earnings management policy
Question 9. A company that seeks to pay a fixed dollar amount in dividends each period
- will likely experience a decrease in its payout ratio over time.
- will likely experience an increase in its payout ratio over time.
- will likely experience stable additions to retained earnings over time.
- will likely violate capital impairment restrictions frequently.
10. Stock prices usually drop by an amount nearly equal to the amount of the dividend on
- the announcement date
- the record date
- the ex-dividend date
- the payment date