#1) Someone who believes in Shareholder Primacy would most likely agree with which of the following statements?

a) Increasing employee wages is a good idea so long as it helps the firm by attracting better employees

b) Management should only be concerned with meeting next quarter's earnings targets

c) Regardless of both legal requirements and costs, the firm should try to minimize pollution to the greatest extent possible

d) Firms should never support local community events regardless of the potential to promote the firm

e) None of the Above

#2) Which of the following is most likely to be a method equity investors can use to "force" the firm to repay them?

a) Use the (implicit) threat of voting to replace the company's board of directors and corporate leadership

b)Vote on issues concerning the day-to-day running of the company

c) Sue the company for violating the explicit contract governing stock ownership

d) All of the Above

e) none of the above

#3 Tin House BBQ uses both debt and equity financing. The federal government recently announced an increase in the corporate tax rate. What is the most likely impact on the company's weighted average cost of capital (WACC)?

a) Increase since taxes are bad

b) Decrease since the effective cost of debt will decrease

c) No change since taxes don't matter

d) Not enough information to decide

#4 Which of the following is a disadvantage of using debt financing?

a) Failure to repay debt will force the company into bankruptcy

b) Unfavorable corporate tax treatment

c)Difficult to issue

d) Must share all decision making with bondholders

e) None of the Above