1. The dividend growth model:

1. Considers both the dividend yield and the coupon yield.

2. Can be used to value all common stocks.

3. Considers both the capital gains yield and the required dividend return.

4. Is dependent on an investors required rate of return.

2. Which of the following is a primary advantage of a sole proprietorship?

I. Limited liability.

II. Less regulation.

III. Ease of ownership transfer.

IV. Ease of company formation.

1. I and II only.

2. I and III only.

3. II and III only.

4. II and IV only.

3. The agency problem is illustrated by which one of the following?

1. The firm creates a management bonus program whereby managers are rewarded when sales increase.

2. Management expands its operations overseas which is favourably received by the financial markets.

3. An employee offers a suggestion which will save the firm money and reduce the stress of his job.

4. Management accepts a merger which was desired by the shareholders.

4. Which one of the following statements is correct?

1. When the internal rate of return is less than the required rate, the project should be rejected.

2. A payback period less than the IRR indicates that a project should be accepted.

3. A profitability index that is less than 1.0 indicates that a project should be accepted.

4. A negative net present value indicates that a project should be accepted.