Question 23 of 25 Which of the following statements is CORRECT? 10 a. One way to increase EVA is to achieve the same level of operating income but with more total invested capital obtained at a higher o cost of capital b. If a firm reports positive net income, its EVA must also be positive. c. One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free. O d. One way to increase EVA is to generate the same level of operating income but with less total invested capital. e. Actions that increase reported net income will always increase cash flow. 0 low key Question 22 of 25 Which of the following statement is CORRECT? a. If a lower level person in a firm does something illegal, like "cooking the books" to understate costs and thereby artificially increase profits because he or she was ordered to do so by a superior, the lower level person cannot be prosecuted but the superior can be prosecuted b. Ethical behavior is not influenced by training and auditing procedures. People are either ethical or they are not, and this is what determines ethical behavior in business. c. There are many types of unethical business behavior. One example is where executives provide information that they know is incorrect to outsiders. It is illegal to provide such information to federally regulated banks, but it is not illegal to provide it to stockholders because they are the owners of the firm. d. If someone deliberately understates costs and thereby causes reported profits to increase, this can cause the stock price to rise above its intrinsic value. The stock will probably fall in the future. Both those who participated in the fraud and the firm itself can be prosecuted. e. Ethics is not an important consideration in business and in business schools. Questions Question 21 of 25) 20. Which of the following statements is CORRECT? O a. There is no good reason to expect a firm's stockholders and bondholders to react differently to the types of assets in which it invests. b. Relative to proprietorships, corporations generally face fewer regulations, and they also find it easier to raise capital. c. Stockholders should generally be happier than bondholders to have managers invest in risky projects with high potential returns as opposed to safe projects with lower expected returns. o O d. Stockholders in general would be better off if managers never disclosed favorable events and therefore caused the price of the firm's stock to sell at a price below its intrinsic value. O e. One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than are partners