An It Executive Is Evaluating Financing Options For A New Project That Could Significantlyincrease Company

Question

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

Finance