Collection of Past Mid-Term-Exam Questions 1. True-false statements (a) Engaging in a negative NPV project raises the stock price. (b) The objective of a corporation is to make money. (c) Public firms smooth dividend per share. (d) The average stock price reaction to a stock dividend announcement is negative. (e) Shareholders of a public firm cannot intervene with the management of the firm. (f) Perfect competition implies that purchases of financial securities are zero net present value investments. (8) Making investments with positive net present value increases the share price. (h) In transactions between the firm and the capital market, investors have the bargain- ing power. (i) For individual stocks, demand curves are vertical and supply curves are horizontal. 6) Dividends fluctuate with earnings. (k) In a family firm, the firm's investment decision is separate from the shareholders' savings decisions. (1) A stock dividend decreases corporate cash holdings. (m) Corporate retention at zero NPV is irrelevant. (n) A rights offer at a discount dilutes the stock price. (0) In a perfect capital market, the firm's investment-payout decision is separate from investors' consumption-savings decisions. (p) A Roth IRA is tax disadvantaged relative a regular savings account. (9) Shareholders of a non-traded family firm want management to use the NPV rule. (r) Present value is additive. (8) Early withdrawal from a Roth 401(k) account is not subject to a 10% penalty tax. (t) Share repurchases have a tax advantage over cash dividends. (u) The firm's investment decision is separate from the shareholders' savings decisions in a family firm. (v) Family firms smooth dividend per share. (w) With personal income tax, firms prefer dividends to repurchases. (x) Social security is a defined-benefit-pension plan. (y) US mutual funds grow after the enactment of the 401(k). (2) A rights offer discount induces participation