Question 1. Corporate managers are expected to make corporate decisions that are in the best interest of:
A) top corporate management.
B) the corporation's board of directors.
C) the corporation's shareholders.
D) all corporate employees.
Question 2. Financial markets are used for trading:
A) both real assets and financial assets.
B) the goods and services produced by a firm.
C) securities, such as shares of IBM.
D) the raw materials used in manufacturing.
Question 4. The term "capital structure" refers to:
A) the manner in which a firm obtains its long-term sources of funding.
B) the length of time needed to repay debt.
C) whether the firm invests in capital budgeting projects.
D) which specific assets the firm should invest in.
Question 5: In the calculation of rates of return on common stock, dividends are ___ and capital gains are ____.
A) guaranteed; not guaranteed
B) guaranteed; guaranteed
C) not guaranteed; not guaranteed
D) not guaranteed; guaranteed
Question 6: An increase in a firm's financial leverage will:
A) increase the variability in earnings per share.
B) reduce the operating risk of the firm.
C) increase the value of the firm in a non-MM world.
D) increase the WACC.
Question 7: Projects that are calculated as having negative NPVs should be:
A) depreciated over a longer time period.
B) charged less in overhead costs.
C) discounted using lower rates.
D) rejected or abandoned.