1.) What should be the decision rule for capital budgeting?

A. Return on investment is greater than or equal to required rate of return

B. Return on investment is less than or equal to required rate of return

C. Return on investment is equal to required rate of return

D. Return on investment is less than required rate of return

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2.) What is the decision rule for NPV?

A. NPV > 0

B. NPV = 0

C. NPV < 0

D. NPV > 0

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3.) What is the decision rule for IRR?

A. IRR > 0

B. IRR < 0

C. IRR = 0

D. IRR > required rate of return

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4.) Which of the following is correct about IRR?

A. IRR is better than NPV

B. IRR may not work with mutually exclusive projects

C. IRR measures the return period of an investment

D. IRR measures dollar return of an investment

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5.) Which of the following capital structure theories states that there is an optimal level of leverage for each company?

A. Birds in hand

B. Tradeoff Theory

C. Market Timing Theory

D. Pecking Order Theory

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6.) What is the relationship between firm value and cost of capital?

A. Positive

B. Negative

C. No Relation

D. Exponential

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7.) Which of the following have tax advantage?

A. Debt Financing

B. Common Stock Financing

C. Preferred Stock Financing

D. IPO

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8.) Which of the following has an exercise price?

A. Forward contracts

B. Options

C. Stocks

D. Bonds

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9.) If you expect a stock to go up, which of the followings positions should you take?

A. Long

B. Short

C. No Position in the Stock

D. Maintaining Existing Position

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10.) If you expect the Yen to go down against the dollar in the future, you should take which of the following positions to make money?

A. Long Yen forward

B. Short Yen forward

C. Long position in Yen futures

D. Buy Yen today