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Q4. The morket value added (MVA) of a fem will always improve if: a. the WACC is increased b the operating profitabilty decreases c. the capital requirement increases. d, the expected e. none of the above etum on invested copital (EROIC) is lower than the WACC on as. A Comp ry has a wACC or 12% and expects a growth rate of 4%. lts current sales and a Capitol Reou n currerty the company has an Opering Profitability (on) of 5% and a Capital Requirements company at 4% growth rate ICRs) of 25%, what is the Market Value Added [MVA) of the Q6. The board of directors may grant stock options to managers in order to a. reduce their risk aversion b. reduce execultive compensation costs C. avoid d. align the interest of managers with that of shareholdten. e. none of the above Q7. Which of the following is an example of business riska a. Default risk b. Risk of prepayment c. Risk of loss in sales operations d. Risk of loss due to currency fluctuations e. Equity risk Q8. is the single most important determinant of the capital struchure of o tm a. Financial leverage b. Financial risk c. Operating income d. Business risk e. Sales revenue Q9. Which of the following leads to less business risks compared to ather factors? a. High percentage of fixed costs b. High operating leverage C. More financial risk d. High interest rates e. More stable operations Q10. Using debt and preferred stock in the capital structure of a firm will a. increase financial risk b. decrease business risk c. increase the tax payable by the firm. d. decrease operating leverage e. increase the book value of common stock Page 12