True or False

1.) A firm's Initial Public Offering (IPO) is its only opportunity to acquire new funds from the equity markets.

2.) Depreciation is a non-cash expense and has no effect on a firm's free cash flows.

3.) Which of the following IS an example of an agency cost in a corporate setting?

Item 1: A project manager choosing a supplier with higher costs and equal quality product due to a personal relationship with the supplier.

Item 2: The COO choosing to attend a conference in Fiji due to its location, when one of equal value was available locally.

Item 3: The firm paying for additional monitoring via both internal and external auditing.

Only Item 1 is an example of an agency cost

Only Item 2 is an example of an agency cost

Only Item 3 is an example of an agency cost

Only Items 1 and 2 are examples of agency costs

Only Items 1 and 3 are examples of agency costs

Only Items 2 and 3 are examples of agency costs

Items 1, 2, and 3 are all examples of agency costs

4.) From a purely financial perspective, which of the following best describes the goal of the firm?

Gain the largest market share

Maximize earnings per share

Minimize cost of capital

Maximize shareholder value