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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
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?
- Less than 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
Which type of financing does it need?
- Trade credit
- Accounts receivable
- 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
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