10 questions True or False?

Question 1

In determining the cost of debt, yields and prices of outstanding bonds are used.

Question 2

The amount of debt capital used by a corporation is not related to the availability of equity funds from retained earnings and new common stock.

Question 3

Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.

Question 4

The investment banker is someone who buys large new issues of stocks and then sells them to the public after their price has risen.

Question 5

Capital markets consist of securities having maturities greater than one year.

Question 6

Bonds may be recalled only if there is a specific call provision in the bond.

Question 7

Bondholders never have any control over the actions of a firm.

Question 8

The "marginal principle of retained earnings" holds that corporate investment should provide a return equal to or higher than that a stockholder could earn.

Question 9

When a bank issues a letter of credit, the bank absorbs ALL of the credit risk to the exporter.

Question 10

In the financing of a foreign affiliate, the simplest and most common arrangement is a direct loan from the parent company to the subsidiary.