Risk of default increases with the use of debt in financing

Assignment Help Financial Management

Reference no: EM132016340

1. If an individual actively participates in the management of a rental property, he may deduct the full amount of the passive activity losses from active income, regardless of his adjusted gross income.

1) True

2) False

2. In general, the risk of default increases with the use of debt in financing.

1) True

2) False

3. A borrower incurring non-recourse debt is effectively acquiring a put option from the lender. The smaller the amount of debt allowed by the lender, the lower the value of the put option.

1) True

2) False

4. If the probability index for an investment project is less than your required rate of return, you should not invest in the project.

1) True

2) False

5. When making an accept/reject decision on an independent project, it is common for the NPV and the IRR to have conflicting recommendations.

1) True

2) False

6. Acquisition costs incurred at the outset of an investment must be written off in the depreciable basis of the property.

1) True

2) False

7. A test that determines if the original issue discount (OID) rules apply is the:

1) time value of money test

2) adequacy of interest test

3) risk-return test

4) (1) and (2)

5) (2) and (3)

8. When net present value is zero, the IRR is equal to the required rate of return.

1) True

2) False

9. Suspended losses are losses that

1) can never be used to offset income.

2) exceed the yearly allowable passive income writeoff.

3) can be used to offset taxable gain at the end of the holding period as long as they do not exceed $25,000.

4) 2 and 3

10. A property that produces an annual NOI of $100,000 was purchased for $1,200,000. Debt service for the year was $95,000 of which $93,400 was interest and the remainder was principal. Annual depreciation is $38,095. What is the passive income?

1) $5,000

2) $6,600

3) -$31,495

4) -$33,095

11. Income from a limited partnership is classified as:

1) active

2) passive

3) portfolio

4) deferred

12. A set-aside of funds into a replacement reserve is a tax-deductible expense.

1) True

2) False

13. The effect of an installment sale is a spreading of the gain and the resulting tax over the period of the installment sale.

1) True

2) False

14. Tax law changes that would affect the value of real estate include:

1) changes in marginal rates (bracket rates)

2) changes in depreciation allowance

3) changes in capital gains rates

Reference no: EM132016340

Questions Cloud

What is such strategy being referred to in the markets : What is such a strategy being referred to in the markets?

Design an implementation plan for preferred intervention : Describe self-managed work groups and the situations for which they are best suited - What changes would you recommend

Explain how materiality is defined by both fasb and iasb : Explain how "materiality" is defined by both FASB and IASB. The concepts statements provide several examples in which specific quantitative materiality.

What is pearson cost of common equity : Pearson's CFO estimates that the company's WACC is 13.00%. What is Pearson's cost of common equity?

Risk of default increases with the use of debt in financing : In general, the risk of default increases with the use of debt in financing. A test that determines if the original issue discount (OID) rules apply is the:

Which forms of power do you consider to be the strongest : Please think about the last serious conflict you had. Which approach did you take to resolve it? Did your conflict resolution style work well?

What would the code look like to implement this : You want tocreatea script that will determine if users were viewing a site before yours and if so, send an alert message to the users to tell them what Web site

Discuss what a balanced scorecard is : Discuss what a balanced scorecard is and how it might benefit your company. Identify and discuss the types of information that would be included in a balanced.

Private-sector incident and a law enforcement crime scene : Are there any differences between collecting evidence in a private-sector incident and a law enforcement crime scene? Explained it

User Account

All Pages