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