An increase in the share price will ...

	a.	always be associated with an increase in the theoretical frim value.
	b.	always benefit both shareholders and bondholders.
	c.	always increase the market capitalization of the firm.
	d.	always reflect the best interests of society

Which of the following is not one of the three objectives used to evaluate the choice of wealth maximization (firm value) as the correct objective?

	a.	Is the objective clear and unambiguous?
	b.	Is the objective viewed the same by bondholders and shareholders?
	c.	Does the objective come with a time measure that can be used to evaluate success and failure?
	d.	Does the objective create any side costs that exceed the overall benefits?

Which of the following issues is not a limit on the effectiveness of options when used as compensation for board members?

	a.	Options may increase the incentive for managers to take on excessive risk.
	b.	Options may increase the incentive for managers to decrease the ability of the firm to pay back bondholders.
	c.	Options may increase the incentive for managers to think like shareholders.
	d.	Options may increase the incentive for managers to mislead financial markets.

Which of the following is not one of the basic principles of corporate finance?

	a.	The financing principle.
	b.	The investment principle.
	c.	The dividend principle.
	d.	The profit principle.

The value of the firm is best measured by...

	a.	the present value of expected earnings discounted back at a rate the reflects both the riskiness of the firms projects and the financing mix used to fund those projects.
	b.	the future value of expected earnings discounted back at a rate that reflects both the riskiness of the firms projects and financing mix used to fund those projects.
	c.	the present value of expected cash flows discounted back at a rate the reflects both the riskiness of the firms projects and the financing mix used to fund those projects.
	d.	the future value of expected cash flows discounted back at a rate that reflects both the riskiness of the firms projects and financing mix used to fund those projects.

Which of the following is not a potential problem associated with the formation of industrial groups in Japan and Germany?

a.

Conflicts of interest between firms.

b.

Less risk taking.

c.

Increased risk taking.

d.

Contagion effects within the group.

Which of the following is the primary goal of a financial manager?

	a.	Decrease fixed costs.
	b.	Increase the value of the firm.
	c.	Increase profit margin.
	d.	Increase earnings per share.