1. Which of the following is a financial asset?

a. An experienced and hardworking sales force

b. A trademark

c. A bank loan

d. Undeveloped land

2. Which of the following decisions will affect Pfizer's capital structure?

a. acquire another pharmaceutical company

b. pay out dividends

c. issue new corporate bonds

d. spend $7.6 billion on research and development of new drugs

3. A manager's compensation plan that only offers financial incentives for increases in quarterly profitability may create agency problems in that:

a. The managers are not motivated by personal gain.

b. Short-term profits, not long-term shareholder values become the focus.

c. The board of directors may claim the credit.

d. It does not help to improve the social responsibility performance of the firm.

4. Apple Computer is well known for its product innovations. Access to financing was not vital to Apple's growth and profitability.

a. True

b. False

5. Ethical decision making by management has a payoff for shareholders in terms of:

a. enhanced reputation value

b. increased managerial benefits

c. improved capital structure

d. higher dividend payments

6. "Double taxation" refers to:

a. paying taxes on profits at the corporate level and dividends at the personal level

b. all partners paying equal taxes on profits

c. corporations paying taxes on both dividends and retained earnings

d. the fact that marginal tax rates are doubled for corporations

7. The agency problem in a corporation is due to:

a. its limited liability

b. double taxation for corporations

c. perpetual life of the corporation

d. the separation of ownership and management

8. The stock price (post dividend) for IBM is $187.5. Earnings per share is $14.5. Book value per share is $18.3. The number of shares outstanding is 1.08 billions. What is the total shareholder value for IBM?

a. $15.66 Billion, which is the total earning

b. $202.5 Billion, which is the market cap

c. $1.08 Billion

d. $19.764 Billion, which is the total book value

9. Today, Kate bought 1,000 shares of Apple Inc. for $119.46 per share in the secondary market. Apple Inc. receives ________ from Katherine?

a. Nothing.

b. The dollar value of the transaction.

c. The dollar amount of the transaction, less brokerage fees.

d. Only the book value of the common stock.