Millie owns stock in an energy company. She has noticed that the market value of her stock does not seem to fall when the company issues no dividends. 1. The market's response to the company supports the idea of .
a. dividend irrelevance.
b. information asymmetry.
c. re-investment bias.
d. the dividend effect.
2. What is one advantage of NPV as a capital budget method?
a. It is equally accurate whether cash flows are known or estimated.
b. It accounts fully for opportunity costs.
c. It is flexible, in the sense that the discount rate can be adjusted to account for factors like risk.
d. Cash flows and the discount rate are easy to accurately determine.
3. What is a question that should be asked about accounts receivable when forecasting?
a. What is the lead time needed to replenish goods?
b. What percentage of sales will likely be made on credit?
c. What do we anticipate owing to our suppliers?
d. Are we taking on too much debt?
4. When managing its cash, a company should make use of float to .
a. set aside cash for future payments.
b. increase the length of the disbursement cycle.
c. make payments before they come due.
d. decrease the length of time for a payment to clear the bank.