1. (TCO A) Which of the following is/are an advantage(s) of incorporation? (Points : 10)

a. Access to capital markets

b.Limited liability

c. Unlimited life

d. All of the above

2.2. (TCO A) A _____ is when a rich individual or organization purchases a large fraction of the stock of a poorly performing firm, and in doing so, gets enough votes to replace the board of directors and the CEO. (Points : 10) a.shareholder proposal

b.leveraged buyout

c.shareholder action

d.hostile takeover

Question 3.3. (TCO A) If Company A and Company B are in the same industry and use the same production method, and Company As asset turnover is higher than that of Company B, then all else equal, we can conclude that (Points : 10)

a. Company A is more efficient than Company B.

b.Company A has a lower dollar amount of assets than Company B.

c.Company A has higher sales than Company B.

d.Company A has a lower ROE than Company B.

Question 4.4. (TCO B) If we use future value rather than present value to decide whether to make an investment, (Points : 10)

a.we will make a bad decision, since the future value will always be higher if the discount rate is positive.

b.we will make a bad decision, since the future value will always be lower if the discount rate is positive.

c.we will make the same decision using either future value or present value.

d.there is not enough information given to answer the question.

Question 5.5. (TCO D) Which of the following statements is FALSE? (Points : 10)

a.Bonds are securities sold by governments and corporations to raise money from investors today in exchange for promised future payments.

b.By convention, the coupon rate is expressed as an effective annual rate.

c.Bonds typically make two types of payments to their holders.

d.The time remaining until the repayment date is known as the term of the bond.

Question 6.6. (TCO D) Which of the following statements is FALSE? (Points : 10)

a.As firms mature, their earnings exceed their investment needs and they begin to pay dividends.

b.Total return equals earnings multiplied by the dividend payout rate.

c.Cutting the firms dividend to increase investment will raise the stock price if, and only if, the new investments have a positive NPV.

d.We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth.