QUESTION 2

As interest rates fall, the prices of bonds decline.

True

False

4 points

QUESTION 3

Equity securities are certificates of ownership of a corporation

True

False

4 points

QUESTION 4

Valuation of common and preferred stock is done using a different valuation formula than that used for bonds

True

False

4 points

QUESTION 5

The goal of the capital budgeting decisions is to select capital projects that will decrease the value of the firm.

True

False

4 points

QUESTION 6

The net present value technique is an approach that goes against the goal of shareholder wealth maximization.

True

False

4 points

QUESTION 7

The term incremental in the context of incremental after-tax free cash flows refers to the fact that the firm's total after-tax free cash flows will change if the new project is adopted.

True

False

4 points

QUESTION 8

It is possible for a firm to have one depreciation schedule for tax purposes and another for financial reporting purposes.

True

False

4 points

QUESTION 9

Total variable costs for a firm do not vary directly with the number of units sold.

True

False

4 points

QUESTION 10

Taxes do not enter into the equation for the degree of cash flow of operating leverage because both fixed costs and pretax operating cash flows are measured on a pretax basis.

True

False