Limited liability is about: 

A. Shareholders do not pay taxes. B. Shareholders are liable only for their capital in the corporation. C. Corporations do not pay taxes. D. Shareholders have more risk with limited liability.

Problem 2

Generally, a corporation is owned by its: I) Shareholders. II) Board of directors. III) Managers. 

A. I only B. II and III C. III only D. I, II, and III 

Problem 3

A corporation, potentially, has infinite life because it:

A. Has the same ownership and management. B. Has limited liability. C. Is not a real person. D. Is closely regulated. 

Problem 4

As a legal entity a corporation can perform the following functions:

I) Trade II) Lend money III) Marry IV) Sue and be sued 

A. I and II only B. IV only C. I, II, and III only D. I, II, and IV only 

Problem 5

Which of the following assets is tangible? 

A. Exxon-Mobil's patents. B. Apple Computer's trademark. C. Hewlett-Packard's most recent factory. D. Microsoft's technical expertise.

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Problem 6

The firm's purchase of real assets is also referred to as the:

A. Investment decision. B. Capital structure decision. C. CFO decision. D. Financing decision. 

Problem 7

Which of the following 

A. Industrial design. B. Patents. C. Programs. D. Computers. 

Problem 8

The sale of financial the:

types of assets are tangible? 

assets by a corporation is also referred to as

A. Financing decision. B. Capital budgeting decision. C. CFO decision. D. Investment decision. 

Problem 9

In the principal-agent framework, from the point of view of shareholders:

A. Shareholders are the principals. B. Managers are the principals. C. Managers are the agents. D. A and C. 

Problem 10

A corporation may incur agency costs because:

A. Shareholders may not attempt to maximize the value of the firm to shareholders.

B. Managers incur monitoring costs. C. Of the separation of ownership and management. D. All of the options.

Problem 11

Which of the following I) Employees II) Customers III) Shareholders 

IV) Suppliers 

A. I, II, and IV only B. III only C. I and II only D. I, II, III, and IV 

Problem 12

The ultimate financial 

groups are referred to as stakeholders? 

goal of a corporation is to: 

A. Minimize stockholder risk. B. Maximize profit. C. Maximize value of the corporation to the stockholders. D. Increase size of the firm.

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Problem 13

The choice of the proper mixture of debt and equity used to finance a corporation, is also referred to as the:

A. Capital budgeting decision. B. Capital structure decision. C. Investment decision. D. Liquidity decision. 

Problem 14

The following are examples of real assets: I) machinery; II) office buildings; III) patents; IV) common stock

A. I, II, and III only B. I and II only C. IV only D. I only 

Problem 15

The following are I) machinery; II) 

examples of tangible assets except: patent; III) warehouses; IV) cars 

A. I only B. III only C. I and III only D. I, II, and III only 

Problem 16

What is false about the cash flows between financial markets and firms operations:

A. The corporation invests cash in firm operations. B. The corporation raised cash from suppliers. C. The corporation obtains cash from firms operations. D. The corporation return cash to investors.

Problem 17

What is false about the investment trade-off?

The financial manager has to decide between invest in a project and pay dividends to shareholders.

Shareholders have to decide between invest in the corporation or other financial assets.

The hurdle rate is the maximum acceptable rate of return on investment for that level of risk.

The cost of capital is the rate of return that could have been earned by putting the same money into a different investment with equal risk.

Problem 18

What is false about the information problems and financial markets?

Under perfect information, markets can predict accurately the combinations of risk and return of the firm.

Under perfect information, the market value of the firm reflects the future performance of the firm.

Under the assumption of perfect financial markets, the shareholders can obtain any combination of risk and returns from markets.

Under imperfect financial markets, shareholders can buy or sell stock to reach their desired profile of return and risk.

Problem 19

What is false about the five important themes?

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Corporate finance is about maximizing the value of the firm for shareholders.

The opportunity cost of capital is a good reference for investment decisions.

C. A safe dollar worth more than a risky dollar. D. Good governance does not matters. 

Problem 20

What is false about market value? 

A. The purchase of real assets is called investment decision. B. Market value is the book value of the company. C. Market capitalization is the value of the outstanding shares

multiplied by the current price. D. Market value not always is equal to market capitalization.

Problem 21

Suppose a loaded dice has a probability of being 6 equal to 0.40 and for the other faces is equal to 0.12. What is the expected outcome of the dice?

A. 3.50 B. 4.20 C. 4.50 D. 3.00 

Problem 22

The price of a stock value distributed uniformly between $2 and $4. Calculate the expected value of the stock price.

A. 2.00 B. 3.00 C. 4.00 D. 5.00 

Problem 23

Suppose the expected price of a stock of firm A is $9. The expected price of a stock B is $7. What will be the expected value of a portfolio consisted in one stock of A and one of B?

A. 9.00 B. 7.00 C. 16.00 D. 8.00 

Problem 24

What is the annual rate of return of a T-bond if we obtain 312 after one year if we invest $300?

A. 4.00% B. 12.00% C. 204.00% D. 312.00% 

Problem 25

What is the expected annual rate of return of a T-bond if we obtain $211 with probability 0.4 and $196 with probability 0.6, if we need to invest $200 for one year?

A. 1.00% B. 2.00% C. 4.00% D. 3.00% 

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