Accounting Finance and Economics (testing)

Using the price of merchandise purchased first to calculate the cost of merchandise sold first is called the _______________ inventory costing method.

• first-in, first-out

• first-in, last out

• last-in, first out

• weighted average

When the weighted average method is used, ending inventory units are priced at the

• earliest price

• most recent price

• average price

• none of these

A company has cost of debt of 6% and cost of equity of 15%. In this country, the corporate income tax rate is 20%. If the company has target debt to total capital ratio of 40%, its WACC is closest to:

• 10.9%

• 11.4%

• 8.88%

• 9.6%

A company's cost of capital is mainly determined by…

• The risk of its underlying businesses.
• Its relationship with investors.
• Its choices of sources of capital.
• The corporate income tax rate.

[HARD] Suppose the market-to-book ratio is 1.5x. From the information provided, the appropriate capital structure for WACC calculation is closest to:

• 35.3%

• 26.7%

• 38.9%

• 63.6%

[HARD] Suppose the market-to-book ratio is 1.5x. From the information provided, the company's WACC is closest to:

• 9.9%

• 10.1%

• 9.2%

• 9.5%

What is an advantage of ROI?

• Allow managers to focus on improving short term financial performance and place less emphasis on long term financial performance.

• Used to evaluate the relative performance of investment centres, irregardless of the size of these business units.

• Promotes goal congruence

Return on investment in a company can be improved by increasing ___________.

• Cost of goods sold

• Restructuring costs

• Cost of capital

• Capital turnover

Which of the following performance metrics is based, in part, on weighted average cost of capital?

• Return on investment

• Capital turnover

• Economic value added

• Residual Income

Which one of the following represents the rate of return a firm must earn on its assets if it is to maintain the current value of its securities? 

• Cost of equity
• Internal rate of return
• Aftertax cost of debt
• Weighted average cost of capital