MULTIPLE CHOICE:

1. Each of the following is a typical source of long-term capital for a firm EXCEPT

A. Accounts Receivable.

B. long-term debt.

C. preferred stock.

D. common stock.

2. ____________________________ is the process of evaluating and selecting long-term investments that are consistent with the firms goal of maximizing owners wealth.

A. Compounding

B. Capital budgeting

C. Normalizing

D. Underwriting

3. ________________________ are projects whose cash flows in a capital budgeting analysis are unrelated to one another. I.e., accepting one project does not prevent the firm from doing the other project, also.

A. Mutually exclusive projects

B. Null projects

C. Independent projects

D. Diversified projects

4. A firm that needs increased production capacity could obtain it by

A. expanding its plant.

B. acquiring another company.

C. contracting with another company for production.

D. A and B.

E. A and B and C.

5. Typically, firms operate under __________________________, as they have only a fixed amount available for capital expenditures.

A. capital rationing

B. free will funding

C. last-in, first-out standards

D. the investment first principle