A CFO May Neglect to Undertake Good Projects If He

question 43

Multiple Choice

A CFO may neglect to undertake good projects if he has

• A)overestimated transaction costs when estimating his firm's WACC.
• B)failed to account for the expropriation concerns of the firm's creditors when estimating his firm's WACC.
• C)underestimated the personal tax rates faced by the firm's investors when estimating his firm's WACC.
• D)both A and C.

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Definitions:

Maturity Date

The date on which a financial obligation must be repaid in full.

Promissory Note

A financial instrument containing a written promise by one party to pay a definite sum of money to another party at a specified future date or on-demand.

Account Receivable

The amount customers are required to pay to a firm for goods and services already received but not yet paid for.

Payee

The party in a financial transaction who receives the payment.