1. When the effective cost of debt is greater its the nominal cost, a. the initial net measurement of the bond is more than the face value. b. The net proceeds is more than the face value. c. The entity records a discount on the bond payable. d. The interest expense is less than the interest payments. 2. Which of these statement are true? [S1] The dividend decision generally involves the same factors as the earnings retention decision. [S2] Under the Dividend Relevance Theory, dividends are valued more than capital gains. 3. The cost of retained earnings is less than the cost of ordinary shares because of a. the issuance cost. b. the trust fund doctrine. c. agency costs of free cash flow. d. the taxation on earnings. 4. GHI Corp., a new and relatively unknown entity, has issued 5-year bonds with an interest rate of 30%. These may also be traded in by the holder for 5 ordinary shares for every P1,000 face value of the bond. GHI added this feature so that once it has better profits, it can entice creditors to be investors instead. This would mean that the bond is a/an a. redeemable junk bond b. redeemable income bond c. convertible income bond d. convertible junk bond 5. A bond does not pay out regular interest. This means that a. It is a junk bond. b. It is unsecured. c. This is a bad investment. d. It is a zero-coupon bond. 6. Under this concept, the entity would first use a fixed ratio of retained earnings and long-term debt financing to meet its financing needs a. Signalling Theory b. Pecking Order Theory c. Financial leverage d. Retained earnings breakpoint
1. When the effective cost of debt is greater its the nominal cost,
a. the initial net measurement of the bond is more than the face value.
b. The net proceeds is more than the face value.
c. The entity records a discount on the bond payable.
d. The interest expense is less than the interest payments.
2. Which of these statement are true? [S1] The dividend decision generally involves the same factors as the earnings retention decision. [S2] Under the Dividend Relevance Theory, dividends are valued more than
3. The cost of
a. the issuance cost.
b. the trust fund doctrine.
c. agency costs of
d. the
4. GHI Corp., a new and relatively unknown entity, has issued 5-year bonds with an interest rate of 30%. These may also be traded in by the holder for 5 ordinary shares for every P1,000 face
a. redeemable junk bond
b. redeemable income bond
c. convertible income bond
d. convertible junk bond
5. A bond does not pay out regular interest. This means that
a. It is a junk bond.
b. It is unsecured.
c. This is a bad investment.
d. It is a zero-coupon bond.
6. Under this concept, the entity would first use a fixed ratio of retained earnings and long-term debt financing to meet its financing needs
a. Signalling Theory
b. Pecking Order Theory
c. Financial leverage
d. Retained earnings breakpoint
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