Question 1

Southwest Supplies Inc. (SSI) is considering the following two projects with cash-flows discounted at SSI's weighted average cost of capital.

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SSI can only afford to invest in one of the projects. Which statement would most likely explain why SSI would choose Project B over project A?

Options :

A : Project B results in a higher cumulative accounting income

B : Project B generates significantly more non-cash expenses

C : Project B cash-flows are relatively more certain

D : Project B cash-flows are to be received sooner

Answer: D

Question 2

Which one or the following costs Is a variable product cost?

Options :

A : Office rent in a temporary staffing company

B : Plant manager s salary for a computer chip manufacturer

C : Payroll taxes based on the hourly wages of plant personnel

D : Promotional materials distributed to raise brand awareness

Answer: C

Question 3

Slam-Dunk Shoes has 5,000 pairs or damaged shoes in inventory. The cost of these shoes was $51,000. in their present condition, the shoes may be sold at clearance prices for $29,000 Slam-Dunk can have the shoes repaired at a cost of $77,000 after which they can be sold for $100,000. What is the opportunity cost of selling the shoes in their present damaged condition?

Options :

A : $23.000

B : $71.000

C : $77, 000

D : $100, 000

Answer: A

Question 4

The best discount rate to the use for evaluate of investment opportunities is the

Options :

A : opportunity cost of capital

B : risk-free interest rate

C : average market interest rate

D : cost of the company-s debt

Answer: A

Question 5

Which one of the following situations describes a secondary offering of stock by a company?

Options :

A : The company has an initial public offering of its stock and its investment bank needs to add mote shares to the initial public offering to meet excess demand by investors

B : After the lockup period of the initial public offering ends, the company 3 founders sell some of their shares to the public

C : The company repurchases shares of its stock in the open market, but it then later sells these shares in the open market

D : After completing its initial public offering, the company sells more new shares of its stock

Answer: B

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