16. ________ took place in financial markets during the Great Recession because large financial institutions took excess risks to realize abnormal positive returns in the housing market while they were simultaneously protected from abnormal losses by being "too-big-to-fail." a. Disintermediation b. Deregulation c. Corporate tax reform d. Moral hazard

17. Mason Construction Inc. had net sales of $480,000, costs of sales of $130,000, additional expenses of $200,000, depreciation of $40,000, and a tax rate of 30%. Use this information to determine the firm's after tax earnings on a cash basis. a. $77,000 b. $105,000 c. $117,000 d. $145,000

18. The Price-Earnings valuation model estimates the price of a share of stock today as the ______. a. sum of a forward looking P/E multiple and the EPS in the next period b. product of the firm's historic P/E multiple and the EPS in the next period c. product of a forward looking P/E multiple and the EPS in the next period d. product of a forward looking P/E multiple and the current EPS

19. Which of the following statements about economic value added (EVA) is NOT true? a. EVA is a measure of value creation. b. EVA is a process for attempting to create value. c. If a firm generates positive EVA then it increases shareholder value. d. all of the above are true

20. Which of the following is NOT a factor that would be analyzed by a firm as part of an external SWOT analysis? a. expected inflation b. expected growth of firm-wide sales c. expected changes in GDP d. political uncertainty

21. If a firm is projected to increases revenues by 10% AND net income by the same amount, which of the following must be TRUE? a. there can be no variable costs b. there can be no fixed costs c. there can be no taxes d. the change in expenses must be exactly equal to the change in revenues

22. Rogue River Retail Inc. has a before-tax cost of debt of 8.00%, a cost of equity of 12.00%, a tax rate of 30.00% and no preferred stock outstanding. If the firm is made up of 50% debt and 50% equity, what is the firm's after-tax cost of borrowing? a. 12.00% b. 11.60% c. 8.00% d. 5.60%

23. Which of the following is likely to lead to an increase in a firm's cost of debt financing? a. an increase in expected inflation b. an increase in the riskiness of assets c. an increase in the average age of debt financing d. all of the above

24. Which of the following equations for the book value plus adjustment method is correct? a. value of equity (VE) = market value of equity - adjustments b. value of equity (VE) = book value of equity + adjustments c. value of equity (VE) = book value of equity - adjustments d. value of equity (VE) = market value of equity + adjustments

25. Cranston Cranks Inc. is a manufacturer of high quality bicycle components. The firm's levered beta is equal to 1.20. When added to a well-diversified portfolio that matches the market beta, the firm would ________ the portfolio beta. a. increase b. decrease c. not affect d. There is insufficient information to answer this question.