The standard deviation is appropriate to compare the risk between two investments only if
Answer
the expected returns from the investments are approximately equal
the investments have similar life spans
objective estimates of each possible outcome is available
the coefficient of variation is equal to 1.
Possible goals of Not-For-Profit (NFP) enterprises include all of the following EXCEPT:
Answer
maximize total costs
maximize output, subject to a breakeven constraint
maximize the happiness of the administrators of the NFP enterprise
maximize the utility of the contributors
To reduce Agency Problems, executive compensation should be designed to:
Answer
create incentives so that managers act like owners of the firm.
avoid making the executives own shares in the company.
be an increasing function of the firm's expenses.
be an increasing function of the sales revenue received by the
Which of the following will increase (V0), the shareholder wealth maximization model of the firm:
V0·(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t + Real Option Value.
Answer
Decrease the required rate of return (ke).
Decrease the stream of profits (πt).
Decrease the number of periods from ∞ to 10 periods.
Decrease the real option value.
To reduce Agency Problems, executive compensation should be designed to:
a. create incentives so that managers act like owners of the firm.
b. avoid making the executives own shares in the company.
c. be an increasing function of the firm's expenses.
d. be an increasing function of the sales revenue received by the firm.
e. all of the above