Finance Questions
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When a firm has the opportunity to add a project that will utilize excess factory capacity (that is currently not being used), which costs should be used to help determine if the added project should be undertaken?A: Average costsB: Sunk costsC: Allocated overhead costsD: Incremental costs
Which of the following statements regarding the net present value rule and the rate of return rule is false?A: Accept a project if NPV is positive.B: Accept a project if NPV > cost of investment.C: Accept a project if return on investment exceeds the rate of return on an equivalent-risk investment in the financial market.D: Reject a project if NPV is negative
The cost of capital is the same as the cost of equity for firms that are financedA: entirely by equity.B: entirely by debt.C: by both debt and equity.D: by 50 percent equity and 50 percent debt.
Suppose that there are no taxes, transactions costs, or other market imperfections. Which of the following actions is most likely to make shareholders better off?A: Eliminate negative-NPV projects.B: Increase dividends.C: Announce that dividends will not change for at least three years.D: Reduce share repurchases.
For the case of an electric car project, the following costs should be treated as incremental costs when deciding whether to go ahead with the project exceptA: interest payments on debt incurred to finance the project.B: the value of tools that will be transferred to the project from the company's existing plants instead of being sold.C: the consequent reduction in sales of the company's existing gasoline models (i.e., incidental effects).D: the expenditure on new plants and equipment
The market value of TCG Limited's common stock is $20 million, and the market value of its risk-free debt is $5 million. The beta of the company's common stock is 1.25, and the market risk premium is 8 percent. If the Treasury bill rate is 5 percent, what is the company's cost of capital? (Assume no taxes.)A: 15.0 percentB: 14.6 percentC: 7.0 percentD: 13.0 percent
Intra-entity gross profits in ending inventory are recognized in consolidated net income though a credit to COGS when the inventory is sold to outsiders. As a intra-entity transferred asset is used in the production process, the intra-entity gain is recognized in consolidation net income by consolidation entries that credit_________ _________
Consistent with the textbook treatment of intra-entity inventory profits, all income effects of intra-entity depreciable asset profits are assigned to the original _________ of the asset
When a parent sells land to its subsidiary at a profit, what is the effect on the noncontrolling interest
The accounting effects of intra-entity depreciable asset sales are removed in consolidation because no __________ of the asset occurred with an outside entity
In periods subsequent to an intra-entity depreciable asset transfer (at a gain), Consolidation Entry *TA is modified when the parent applies the equity method and the transfer was downstream. The modification replaces the adjustment to the parent's retained earnings with an adjustment to the Investment in Subsidiary account because
When an intra-entity sale has occurred, consolidation worksheet entry TI removes both the related purchase (through a credit to COGS) and a debit to the related ___________ account
When the parent applies the equity method and routinely upstream inventory transfers from a subsidiary, Consolidation Entry *G involves a credit to COGS to recognize the intra-entity gross profit in beginning inventory and a debit to
How does the direction of intra-entity land transfers (resulting in intra-entity gain on sale) affect the computation of the noncontrolling interest's share of consolidated net income
When the parent applies the equity method and routinely transfers inventory downstream, any intra-entity gross profits remaining in the consolidated entity's ending inventory
How does the ASC describe the effect of intra-entity gross profit remaining in ending inventory on the noncontrolling interest?
When land is sold at a gain across members of a consolidated group, in years subsequent to the land sale, where does the gain reside
B Company sells land to its parent A Company and records a gain on the sale. In the year of the sale, what accounts must be adjusted in preparing a consolidation worksheet?
Which of the following Consolidation Entries has the net effect of increasing the current period's consolidated net income?
When the parent employs the equity method for its Investment in Subsidiary account, in consolidated financial reports the parent's Retained Earnings account will equal __________ retained earnings