Fight Finance

(a) Buy less land, buildings and trucks than what was planned. Assume that this has no impact on revenue.

(b) Pay off more debt than was planned, to reduce the firm’s interest expense.

(c) Change the depreciation method used for tax purposes from diminishing value to straight line, so less depreciation occurs this year and more occurs in later years. Assume that the government’s tax department allow this.

(d) Buying more inventory than was planned, so there is an increase in net working capital. Assume that there is no increase in sales.

(e) Raising new equity through a rights issue. Assume that all of the money raised is spent on new capital assets such as land and trucks, but they will be fitted out and delivered in one year so no new cash will be earned from them.

Would you like to the share or politely ?

Interest expense on debt is tax-deductible, but dividend payments on equity are not. or ?

The "interest expense" on a company's annual income statement is equal to the cash interest payments (but not principal payments) made to debt holders during the year. or ?

After one year, would you be able to buy , exactly the as or than today with the money in this account?

(a) 0.75

(b) 0.833333333

(c) 1

(d) 1.166666667

(e) 1.4

(a) If stock A's return increases, stock B's return is also expected to increase.

(b) If stock A's return decreases, stock B's return is also expected to decrease.

(c) If stock A and B were combined in a portfolio, there would be no diversification at all since they are positively correlated.

(d) Stock A and B's returns have positive covariance.

(e) a and b.