1) A bonds call provision is likely to be exercised when

Select one:

a. interest rates in the market have risen over the coupon rate on the bond

b. the price of the bond is less than par

c. the sinking fund has accumulated enough money to retire the bond issue

d. Interest rates in the market are sufficiently lower than the coupon rate on the bond

e. Any of the above circumstances might trigger a call provision

2) Which of the following statements is true?

Select one:

a. The calculation of the cost of capital depends upon historical costs of funds

b. It is standard practice to evaluate investment decisions using the cost of the specific financing method involved

c. Retained earnings represent an internal source of funds that is raised without the payment of interest, or cost to the firm's stockholders

d. A firm's cost of preferred stock is equal to the preferred dividend divided by the net price after flotation costs

3) Which of the following actions would likely reduce potential conflicts of interest between shareholders and mangers?

Select one:

a. The portion of executive compensation in the form of cash is increased and the portion from performance related bonuses is decreased.

b. The companys outside auditing firm is retained for a lucrative consulting engagement.

c. The Board of Directors reduces its oversight and allows executives more freedom in operational decision making.

d. The company engages a firm of lobbyists to promote the dissolution of the Securities and Exchange Commission which is the source of most agency conflicts.

e. None of the above would reduce conflict of interest.

4) Which of the following from the Reading, The Case for Non-Voting Stock are true?

• The S&P Dow Jones Indices do not, in most circumstances, include companies with multiple classes of stock.
• The traditional view is that multiple classes of stock insulate the firm from the shareholder influence.
• Firms that have made use of dual class structures include Google, Facebook and Snap Inc.

Select one:

a. One of the above is true

b. Two are true

c. All are true

d. None are true