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11 What is/are the primary goal/s of financial managers? A. Maximize profit Minimizing the WACC Maximize stockholder's wealth . C. D. Both A and C 12. The effect of financial leverage depends on the EBIT is relatively company's EBIT. When leverage is beneficial. High Low . . C. Stable D. Violate 13. Because of the impact that financial leverage return to stockholders has on both the expected and the riskiness of the stock, capital structure is an important consideration. True False A. . 14. There are two major methods for determining the cost of equity. They are: . Dividend growth model and CAPM SML and CAPM Cost of equity, CAPM Dividend growth model, Cost of equity . . D. 15. The cost of debt is: . The required return on our company's debt Best estimated by computing the yield-to- . maturity on the existing debt C. NOT the coupon rate All the above D. Dividends are tax deductible, so there is tax 16. impact on the cost of equity . . True False .are costs that have accrued in the past. Sunk costs Opportunity costs Financial costs Taxes 17. A. . C. D. 18. If the salvage value is different from the book there is a tax effect value of the assets, then A. . True False 19 criteria for capital budgeting EXCEPT: A. Which of the following are good decision decision rules, Does the decision rule adjust for the time value of money? . . Does the decision rule adjust for risk? Does the decision rule provide information on whether we are creating D. decision? value for the firm? Does the decision rule provide an absolute includes net income. includes changes in fixed assets. includes changes in notes payable. 20. Investment activity, operating activity, financing A. activity . Financing activity, investment activity, operating activity C. Operating activity, investment activity, financing activity Financing activity, operating activity, investment activity