1,Granting stock options to the company's CEO as part of his or her compensation package is an example of agency cost.

True

False

2.

ACME Corporation

Income Statement			Balance Sheet
Year Ended 12/31/10				12/31/2010		12/31/2009
Sales	$1,300,000		Current Assets	$50,000		$45,000
Cost of Goods Sold	750,000		Gross Fixed Assets	880,000		650,000
Operating Expenses	200,000		Less Accumulated Depreciation	450,000		350,000
Depreciation Expense	100,000		Fixed Assets	430,000		350,000
EBIT	250,000		Total Assets	$480,000		$395,000
Interest Expense	50,000
EBT	200,000		Current Liabilities	$35,000		$50,000
Taxes	80,000		Long-term Debt	330,000		270,000
Net Income	$120,000		Common Stock	5,000		5,000
			Retained Earnings	110,000		70,000
			Total Liabilities & Equity	$480,000		$395,000

Referring to the above financial statements for ACME Corporation, the amount of dividends paid by the company for 2010 is

	a.	$45,000
	b.	$25,000
	c.	$100,000
	d.	$80,000

3.

The number of shares in the corporate Treasury Stock account is inversely related to the firms earnings per share (EPS), all else being equal.

True

False

4.

Suppose you observed the following quote for IBMs stock price: Bid / Ask 137.39 / 137.41. Then, the relative bid-ask spread of this stock is closest to

	a.	-0.9998
	b.	0.9998
	c.	0.00015
	d.	-0.00015