QUESTION 14 In the process of liquidation, some types of claims receive preference over other claims. Which one of the following determines which type of claim is paid first? A The Securities and Exchange Commission B. Accounting insolvency definition O Technical insolvency definition D. Absolute Priority Rule Chapter 11 of the Federal Bankruptcy Reform Act of 1978 QUESTION 15 Farmer's Supply Inc is considering opening a clothing store, which would be a new line of business for the firm, Management has decided to use the cost of capital of a similar dothing store as the discount rate that should be used to evaluate this proposed expansion. Which one of the following terms is used to describe the approach Farmer's Supply is taking to establish an appropriate discount rate for the project? A Marketplay OB Equity approach Subjective approach D. After-tax approach Pure play approach OLIESTINN QUESTION 16 Uptown Insurance offers an annuity due with semi-annual payments for 25 years at 6 percent interest. The annuity costs $200,000 today. What is the amount of each annuity payment? A 57,546.70 8.57,600.00 C 57,856.25 D.57,773.10 E 57,800.00 QUESTION 17 The security market line is defined as a positively sloped straight line that displays the relationship between which two of the following variables? A Nominal and real returns B. Beta and standard deviation Risk premium and beta Systematic and unsystematic risk E Expected return and beta QUESTION 18 Mark is analyzing a proposed project to determine how changes in variable costs per unit would affect the project's net present value. What type of analysis is Mark conducting? A Scenario analysis Cost benefit analysis Erosion planning D. Sensitivity analysis Opportunity cost analysis QUESTION 19 QUESTION 19 The potential conflict of interest between a firm's owners and its managers is referred to as which type of conflict? A Territorial Structure Formation D. Agency Organizational the risk The lower the standard deviation of returns on a security, the the expected rate of return and the A higher, higher Blower, higher higher, lower D. You cannot determine anything about the expected rate of return from the standard deviation. lower, lower