______ 22. ____________________ projects do not compete with each other; the acceptance of one

___________ the others from consideration.

A. Capital; eliminates

B. Independent; does not eliminate

C. Mutually exclusive; eliminates

D. Replacement; does not eliminate

______ 23. Which of the following capital budgeting techniques ignores the time value of money?

A. the payback period

B. Net Present Value (NPV)

C. Internal Rate of Return (IRR)

D. Weighted Average Cost of Capital (WACC)

______ 24. The four basic sources of long-term funds for the business firm are

A. current liabilities, long-term debt, common stock, and preferred stock.

B. current liabilities, long-term debt, common stock, and retained earnings.

C. long-term debt, paid-in capital in excess of par, common stock, and commercial paper.

D. long-term debt, common stock, preferred stock, and retained earnings.

______ 25. Generally, the order of cost from least expensive to the most expensive, for long-term

capital of a corporation is

A. long-term debt, preferred stock, retained earnings, new common stock.

B. common stock, preferred stock, long-term debt, short-term debt.

C. new common stock, retained earnings, preferred stock, long-term debt.

D. preferred stock, long-term debt, retained earnings, common stock.

______ 26. A firm has determined its cost of each source of capital and its optimal capital structure, which is

composed of the following sources and target market value proportions:

Source of Capital	Target Market Proportions:	After-Tax Cost
Long-Term Debt	45%	5%
Preferred Stock	10%	14%
Common Stock Equity	45%	22%

If the firm were to shift toward a more leveraged capital structure (i.e., a greater percentage of

debt in the capital structure), the weighted average cost of capital would

A. increase.

B. remain unchanged.

C. decrease.

D. not be able to be determined.

______ 27. The firms __________________ is the level of sales necessary to cover all operating costs.

I.e., this is the point at which Earnings Before Interest and Taxes (EBIT) is equal to $0.

A. cash breakeven point

B. financial breakeven point

C. operating breakeven point

D. total breakeven point.

______ 28. If a firms selling price per unit decreases, the firms operating breakeven point will

A. decrease.

B. increase.

C. remain unchanged.

D. change in an undetermined direction.

______ 29. Fixed costs are a function of ______________, not sales, and are typically contractual.

A. EBIT

B. variable cost.

C. time

D. marginal cost

______ 30. If a firms fixed operating costs increase, the firms operating breakeven point will

A. increase.

B. not be affected.

C. decrease.

D. remain unchanged.