Table 10-4 The Following Information Pertains to the Bank of Moncton

question 99

Multiple Choice

Table 10-4
The following information pertains to the Bank of Moncton.
-Refer to the Table 10-4.If the Bank of Canada requires a reserve ratio of 4 percent,how much in excess reserves does the Bank of Moncton now hold?

• A) $1200
• B) $1400
• C) $2880
• D) $3000

Recognize the difference between business risk and financial risk, and their determinants.

Understand how the optimal capital structure minimizes the weighted average cost of capital (WACC) and maximizes firm value.

Analyze the implications of the static theory of capital structure on financial decision-making.

Identify the conditions under which the interest tax shield adds value to the firm.

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Definitions:

Gross Margin Percentage

A profitability metric expressed as a percentage, calculated by subtracting the cost of goods sold from sales revenue and dividing the result by sales revenue.

Net Profit Margin

The percentage of revenue remaining after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from a company's total revenue.

Return on Assets

A measure of a company's profitability relative to its total assets, indicating how efficiently a company uses its assets to generate earnings.

Cost of Borrowing

The total charges, including interest and any other fees, that a borrower pays to secure and use borrowed money.