CTFA

CTFA practice questions, page 18 of 35, with answer review and explanations.

Question 86

A technique used to reduce taxes in which a taxpayer shifts a portion of income to relatives in lower tax brackets.

  1. Income shifting
  2. Tax deferred
  3. Tax avoidance
  4. Tax Evasion

Question 87

When using a probability tree approach, we discount the various cash flows to their present value at:

  1. The firm's weighted-average cost of capital
  2. The project's required rate of return
  3. The risk-free rate
  4. The after-tax cost of the firm's long-term debt

Question 88

A managerial option, in effect:

  1. Limits the flexibility of management's decision-making
  2. Limits the downside risk of an investment project
  3. Limits the profit potential of a proposed project
  4. Applies only to new projects

Question 89

The presence of managerial, or real, options the worth of an investment project.

  1. Increases
  2. Decreases
  3. Does not affect
  4. Increases or decrease

Question 90

A firm's degree of operating leverage (DOL) depends primarily upon its:

  1. Sales variability
  2. Level of fixed operating costs
  3. Closeness to its operating break-even point
  4. Debt-to-equity ratio