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QUESTION

An IT executive is evaluating financing options for a new project that could significantlyincrease company

An IT executive is evaluating financing options for a new project that could significantly

increase company

profits each year if the new project is implemented.

The cost of capital for the project is 5%

Which internal rate of return (IRR) is needed to make the project worthwhile?

- 0%

- Less than 5%

- 5%

- More than 5%

———

Which financing strategy involves borrowing funds that must be repaid with interest?

- Reinvesting company profits

- Issuing shares of common stock

- Leasing necessary equipment

- Issuing corporate bonds

———

A company needs to purchase networking equipment every month to fulfill project

hardware requirements.

Which type of financing does it need?

- Trade credit

- Accounts receivable

- Inventory

- Bank loan

———

What is an advantage of short-term financing?

- Restrictive loan requirements

- Increased liquidity

- Multiyear repayment terms

- Lower interest rates

———

A company plans to expand into new sales territories and decides to obtain a long-term

loan.

What is an advantage of long-term financing?

- Lowers leverage by paying more interest

- Increases stockholder ownership

- The interest is tax deductible

- Creditors prefer companies with lower equity levels

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