ques 1. A company has $100 million in unexpected cash flow and is trying to decide whether to use the money to pay a dividend to shareholders or to use the money to pay back debt. How might that decision be affected if the managers making the decision were paid based on a. The companys profit margin b. The companys return on equity

ques 2. The following are potential issues of misinterpretation of statistical results; a. A manager runs a regression with advertising as the independent variable and sales as the dependent variable and expects an insignificant result, since he knows changes in sales do not cause changes in advertising. Is this expectation well-founded? b. A manager runs a regression using monthly data with sales of sleds as the independent variable and sales of snow shovels as the dependent variables, finds a statiscally significant result, and concludes that a sale of snow shovels will help them sell more sleds. What potential misinterpreta!on of the result is involved here?

ques 3. Explain which, if any, definition of market efficiency would be violated by each of the following statements being true: a. To the extent such trades are legal, managers are able to earn be"er profits than outsiders by timing their trades. b. Companies which perform poorly in one year are more likely to fire their CEO in the following year. c. Buying a portfolio of stocks which have increased dividends in the last year outperforms a portfolio of stocks which did not increase dividends in the last year. d. A manager is able to earn a higher expected return by having more risky stocks in their portfolio