______  16.  Each of the following is atypical source of long-term capital for a firmEXCEPT

                                                A.  AccountsReceivable.

                                                B.long-term debt.

                                                C.  preferredstock.

                                                D.  commonstock.

______  17.  ____________________________ isthe process of evaluating and selecting long-term

                                                investmentsthat are consistent with the firm’s goal of maximizing owners’wealth.

A. Compounding

B. Capital budgeting

C. Normalizing

D. Underwriting

______  18.  ________________________ areprojects whose cash flows in a capital budgeting analysis are

                                                unrelatedto one another.  I.e., accepting one project does notprevent the firm from doing the

                                     otherproject, also.

A. Mutually exclusive projects

B. Null projects

C. Independent projects

D. Diversified projects

______  19.  A firm that needs increasedproduction capacity could obtain it by

A. expanding its plant.

B. acquiring another company.

C. contracting with another companyfor production.

D. A and B.

E. A and B and C.

______  20.  Typically, firms operate under__________________________, as they have only a fixed

                                                amountavailable for capital expenditures.

A. capital rationing

B. free will funding

C. last-in, first-out standards

D. the “investment first”principle

______  21.  The _____________________method measures how long (in years and/or months) it takes

                                                torecover the initial project investment, based on the project’s cashinflows.

A. “Net Present Value” (NPV)

B. “Internal Rate of Return”(IRR)

C. payback period

D. Profitability Index (PI)

______  22.  Each of the following isconsidered to be an advantage of the payback period capitalbudgeting

                                                methodEXCEPT

A. it uses discounted cash flows inits analysis.

B. it is simple and intuitive touse.

C. it considers cash flows, ratherthan accounting profits.

D. it can be used as a supplementto other capital budgeting methods.

______  23.  With the “Net Present Value”(NPV) method of capital budgeting, a firm would undertake a

                                                projectonly if

A. the project’s payback period isless than 3 years.

B. the present value of the cashflows that the project generates is greater than the cost of

making the investment.

C. the present value of the cashflows that the project generates is less than the cost of

making the investment.

D. the project cost is less than$1,000,000.

______  24.  When using the “Net PresentValue” (NPV) method for capital budgeting analysis,

A. if NPV > $0, then the projectwill be accepted.

B. if NPV < $0, then the projectwill be rejected.

C. A and B.

D. None of the above.

______  25.  When companies evaluateinvestment opportunities using the “Profitability Index” (PI)

                                                analysismethod, the firm will

A. invest in the project when theProfitability Index is less than 1.0.

B. invest in the project when theProfitability Index is greater than 1.0.

C. invest in the project only whenthe prime interest rate on the market exceeds 5%.

D. invest in the project only whenthe project’s Profitability Index has exceeded 1.0 for

three consecutive years.

______  26.  The firm’s “operating breakevenpoint” (OBP) is

A. the level of operations at whichthe dividend payment to shareholders is maximized.

B. the level of sales necessary tocover all operating expenses.

C. the level of operations at whichthe firm’s sales revenue exactly equal the firm’s

“Total Assets.”

D. the level of profits at whichthe firm’s Price/Earnings (P/E) ratio is maximized.

______  27.  Each of the following is anexample of a fixed cost for a manufacturing firmEXCEPT

A. Rent Expense on the productionfacility.

B. insurance premium costs toinsure the production facility.

C. property taxes owing on theproduction facility.

D. cost of the electricity expenseto run the line production equipment.

______  28.  Generally, if____________________ increase, then a firm’s operating breakevenpoints will

                                                alsoincrease.

A. fixed operating costs (FC)

B. variable operating cost per unit(VC)

C. dividend payments per share

D. A and B and C

E. A and B

______  29.  Effective capital structuredecisions for a firm can

A. lower the firm’s cost ofcapital.

B. result in higher “Net PresentValue” (NPV) outcomes for capital budgeting projects the

firm undertakes.

C. result in more capital budgetingprojects being accepted.

D. A and B and C.

______  30.  Each of the following is apossible source ofequitycapital for a firmEXCEPT

                                                A.  long-termbonds.

                                                B.  preferredstock.

                                                C.  commonstock.

                                                D.  retainedearnings.