Identify common political factors for an MNC to consider when assessing country risk. Briefly elaborate on how each factor can affect the risk to the MNC. Why might a firm use a “local” capital structure at a particular subsidiary that differs substantially from its “global” capital structure? 500 words total – APA format. Answer the 2 questions below DO NOT PLAGIARIZE.

Identify common political factors for an MNC to consider when assessing country risk. Briefly elaborate on how each factor can affect the risk to the MNC.
Why might a firm use a “local” capital structure at a particular subsidiary that differs substantially from its “global” capital structure?

500 words total – APA format. Answer the 2 questions below DO NOT PLAGIARIZE.

Facebook is currently the world’s most popular social­networking site. Many members have revolted against Facebook for constantly changing its user information policy. What is the current user information policy and what are the legal complications associated with it? What are the implications of Facebook changing its user information policy? Is Facebook legally required to notify users of changes in their privacy policy, if yes, in what manner? Facebook Grapples With Privacy Issues or another source

Facebook is currently the world’s most popular social­networking site. Many members have revolted against Facebook for constantly changing its user information policy. What is the current user information policy and what are the legal complications associated with it?
What are the implications of Facebook changing its user information policy?
Is Facebook legally required to notify users of changes in their privacy policy, if yes, in what manner?
Facebook Grapples With Privacy Issues or another source

This paper is primarily a report. The report portion should be objective and unbiased. The final section is an opinion section where you may include your own ideas on the subject. To understand the legal and environmental issues raised by hydraulic fracturing. To determine what you believe is the most important environmental issue. To be able to distinguish state and federal laws and regulations; to become familiar with proposed federal laws; to be able to compare and contrast state law approaches; to examine at least one other country’s laws and regulations on the issue; to understand the scope of a recent executive order on hydraulic fracturing. To understand the place of hydraulic fracturing of oil and gas as that relates to U.S. energy needs. To form and state your own informed opinion on what hydraulic fracturing laws and regulations should be put in place; to explain with clear reasoning and supporting evidence why you think such laws are necessary. Your final paper should address each of these objectives. The report should include a discussion of the legal and environmental issues raised by hydraulic fracturing, including what you believe to be the most important issue; it should contain a discussion of federal and state regulations that address hydraulic fracturing. It should compare the varying approaches of at least two states. It should compare U.S. and foreign approaches to hydraulic fracturing regulation. It should address the scope of the president’s executive order on hydraulic fracturing (see Doc Sharing). It should discuss the place of hydraulic fracturing of oil and gas in meeting U.S. energy needs; it should discuss economic impact (could be local, regional, or national) It should conclude with your own informed opinion on what hydraulic fracturing laws and regulations should be put in place, supported with clear reasoning and relevant facts. Guidelines Back to Top Microsoft Word document, 7-8 pages in length, all formatting in accordance with the current edition of the APA Style Manual. Include a cover page, table of contents, body of the report, summary or conclusion, references. Check your work for spelling and grammar. Carefully proofread your paper for spelling and grammar and double check all citations for accuracy. Be sure you have correctly cited all references. In addition to citing to any of the material which is supplied for the weekly deliverables or which is placed for your use in Doc Sharing or placed for your use in the Webliography, you must cite to at least four, scholarly journal sources which are the product of your own research. Your research should be conducted in the DeVry library. You may use no more than one website as a source. All sources should be listed on the last page titled References. Carefully review and comply with DeVry’s Academic Integrity Policy to assist you in avoiding plagiarism. Deliverables are due according to the schedule found under Milestones. The final paper is due Week 6. Submit your paper to the Week 6 Dropbox at the top of this page. For instructions on how to use the Dropbox, read these step-by-step instructions or watch this Dropbox Tutorial. Milestones Back to Top The total points for this Course Project are 160. Failure to deliver any of the following week’s deliverables will result in a 10-point loss for that week. This means you must satisfactorily deliver all of the Week 2 requirements or lose 10 points; failure to deliver all of Week 3 requirements will result in the loss of another 10 points and failure to deliver all of Week 4 requirements will result in the loss of another 10 points. Week 2: Form a working definition of hydraulic fracturing. Demonstrate familiarity with how hydraulic fracturing is actually performed. Distinguish gas and oil fracturing. Show where hydraulic fracturing is currently underway in the United States, Europe, and South America. Write a working definition of hydraulic fracturing. Write a brief description of how the process works (25—50 words). Chapter 8 of the president’s economic report for 2012, at page 256 details some of the economic effects of hydraulic fracturing. http://www.whitehouse.gov/sites/default/files/microsites/ERP_2012_ch_8.pdf Oil fracking in the Bakken Shale in and around Williston, North Dakota has had dramatic economic effects. The May, 2012 issue of the Oil and Gas Journal had a lengthy article on the Williston boom. Using such material (and any other source material you may find) write a 2–3 paragraph summary of the economic impact of hydraulic fracturing. Provide links or citations to other material you have found that might be useful in writing about the above points. Submit your work to the Course Project Deliverables Dropbox in Week 2. Week 3: What are the legal issues raised by hydraulic fracturing? The environmental issues? What part does (will) hydraulic fracturing play in meeting U.S. energy needs? Fracking and the Safe Drinking Water Act issues are discussed extensively in this Congressional Research Service report: http://www.arcticgas.gov/sites/default/files/documents/hydraulic-fracturing-and-safe-drinking-water-act-issues.pdf See also Chapter 8 of the president’s economic report referenced above. The Louisiana Bar Journal Vol. 59, No. 4, page 253, reports other fracking issues. Isolate three or four such issues and report them in bullet-point form. Each point should state the issue and a brief explanation (no more than one paragraph). Example: Dumping toxic waste—Uncontrolled dumping of toxic waste into waterways has created dead zones (places where marine and aquatic life cannot survive) worldwide, including an area in the Gulf of Mexico the size of Lake Ontario. Provide links or citations to at least two other sources you have found that will be useful in writing about the above points. Submit your work to the Course Project Deliverables Dropbox in Week 3. Week 4: Briefly, in 2–3 paragraphs, answer the following: What is Pennsylvania Act 13? Compare it to Vermont’s May 2012 legislation: http://www.leg.state.vt.us/docs/2012/Bills/Intro/H-464.pdf Compare these with the New York State decision on local control of fracking found in Doc Sharing at . Using the studies, such as The Final Report on Unconventional Gas in Europe, write a brief 1–2 paragraph statement that discusses at least one specific country’s regulations (see page 5 for general information and pages 48, 49, and 50 for country-specific information.) On April 13, 2012, President Obama issued this executive order; briefly, in 1–2 paragraphs, explain what the order provides. You can find the executive order at this address (or look in Doc Sharing). http://www.whitehouse.gov/the-press-office/2012/04/13/executive-order-supporting-safe-and-responsible-development-unconvention Provide links or citations to at least two other sources you have found that will be useful in writing about the above points. Submit your work to the Course Project Deliverables Dropbox in Week 4. Week 6—Submit your final paper by placing it in the Dropbox for Week 6. Grading Rubrics Back to Top Category Points % Description First Deliverable Second Deliverable Third Deliverable 10 10 10 19 See Precise instructions under Milestones. Deliverables are due in Weeks 2, 3, and 4. Final Paper is due in Week 6. Documentation and Formatting 16 10 Organization and Cohesiveness 18 11 Editing 16 10 Content 80 50 Total 100 A quality paper will meet or exceed all of the above requirements. Best Practices Back to Top Begin by getting an overall view of your subject. Do some general reading on hydraulic fracturing; learn what it is and why it is important. Understand the process and its impact on energy issues and environmental issues. Pay attention to the weekly deliverables. They will not only help you to learn about the subject in an organized way, they will also help to form a foundation for your paper. Before you begin to write, think about how you want to organize your paper. Many students prepare an outline; you should at least jot down the important points you plan to cover. If you are having trouble getting started, begin by writing the section you find easiest or most interesting—you can organize and assemble the sections of the paper into their proper order later. After you’ve completed your first draft, put the paper aside for a day—or at least a few hours. Then go back and read your material—is it well-organized? Have you covered all the important points? Does the work flow? Are transitions smooth? Do sections need editing? Are they clear? Are they too short; too long? Once you feel that content is okay, go back and proofread the paper; look carefully for spelling and grammar errors. Do not depend on spell-check to find all spelling errors—if you don’t believe me, run this sentence through spell-check: “ If yew us only spell-check, yew can never no for sure that their r know spelling miss takes.” Finally, cite-check your paper. Don’t try to revise, edit, proofread, and cite-check all at one time. You will miss something. Your introduction should get the reader’s attention. Introduce the subject and say why it’s important. (“Hydraulic fracturing could yield a natural gas supply to meet all U.S. needs for the next 100 years.”) In this first paragraph or two, preview the main ideas—give a map of your paper to the reader. (“In this paper I will discuss A and B and show how C will play an important role in the future.”) Be sure to maintain an academic tone. Don’t use slang. Don’t use familiar terms. (Don’t write: “It was completely stupid of XYZ not to follow the rules.” Do write: “XYZ Corporation made a fatally careless move in failing to follow EPA regulations.”) Make the body of your paper readable by using subheads. Organize the body of the paper to conform to the map you used in the introduction. As you shift sub-topics, be sure to let the reader know where you’re headed. Remember to give credit if you use photos, graphs, maps, etc. Your summary should recapitulate the main ideas and main points in the paper.

This paper is primarily a report. The report portion should be objective and unbiased. The final section is an opinion section where you may include your own ideas on the subject.

To understand the legal and environmental issues raised by hydraulic fracturing. To determine what you believe is the most important environmental issue.

To be able to distinguish state and federal laws and regulations; to become familiar with proposed federal laws; to be able to compare and contrast state law approaches; to examine at least one other country’s laws and regulations on the issue; to understand the scope of a recent executive order on hydraulic fracturing.

To understand the place of hydraulic fracturing of oil and gas as that relates to U.S. energy needs.

To form and state your own informed opinion on what hydraulic fracturing laws and regulations should be put in place; to explain with clear reasoning and supporting evidence why you think such laws are necessary.

Your final paper should address each of these objectives. The report should include a discussion of the legal and environmental issues raised by hydraulic fracturing, including what you believe to be the most important issue; it should contain a discussion of federal and state regulations that address hydraulic fracturing. It should compare the varying approaches of at least two states. It should compare U.S. and foreign approaches to hydraulic fracturing regulation. It should address the scope of the president’s executive order on hydraulic fracturing (see Doc Sharing).

It should discuss the place of hydraulic fracturing of oil and gas in meeting U.S. energy needs; it should discuss economic impact (could be local, regional, or national) It should conclude with your own informed opinion on what hydraulic fracturing laws and regulations should be put in place, supported with clear reasoning and relevant facts.
Guidelines
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Microsoft Word document, 7-8 pages in length, all formatting in accordance with the current edition of the APA Style Manual.

Include a cover page, table of contents, body of the report, summary or conclusion, references.

Check your work for spelling and grammar. Carefully proofread your paper for spelling and grammar and double check all citations for accuracy. Be sure you have correctly cited all references.

In addition to citing to any of the material which is supplied for the weekly deliverables or which is placed for your use in Doc Sharing or placed for your use in the Webliography, you must cite to at least four, scholarly journal sources which are the product of your own research. Your research should be conducted in the DeVry library. You may use no more than one website as a source. All sources should be listed on the last page titled References.

Carefully review and comply with DeVry’s Academic Integrity Policy to assist you in avoiding plagiarism.

Deliverables are due according to the schedule found under Milestones. The final paper is due Week 6. Submit your paper to the Week 6 Dropbox at the top of this page. For instructions on how to use the Dropbox, read these step-by-step instructions or watch this Dropbox Tutorial.

Milestones
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The total points for this Course Project are 160. Failure to deliver any of the following week’s deliverables will result in a 10-point loss for that week. This means you must satisfactorily deliver all of the Week 2 requirements or lose 10 points; failure to deliver all of Week 3 requirements will result in the loss of another 10 points and failure to deliver all of Week 4 requirements will result in the loss of another 10 points.

Week 2: Form a working definition of hydraulic fracturing. Demonstrate familiarity with how hydraulic fracturing is actually performed. Distinguish gas and oil fracturing. Show where hydraulic fracturing is currently underway in the United States, Europe, and South America.

Write a working definition of hydraulic fracturing.

Write a brief description of how the process works (25—50 words).

Chapter 8 of the president’s economic report for 2012, at page 256 details some of the economic effects of hydraulic fracturing. http://www.whitehouse.gov/sites/default/files/microsites/ERP_2012_ch_8.pdf Oil fracking in the Bakken Shale in and around Williston, North Dakota has had dramatic economic effects. The May, 2012 issue of the Oil and Gas Journal had a lengthy article on the Williston boom. Using such material (and any other source material you may find) write a 2–3 paragraph summary of the economic impact of hydraulic fracturing.

Provide links or citations to other material you have found that might be useful in writing about the above points.

Submit your work to the Course Project Deliverables Dropbox in Week 2.

Week 3: What are the legal issues raised by hydraulic fracturing? The environmental issues? What part does (will) hydraulic fracturing play in meeting U.S. energy needs? Fracking and the Safe Drinking Water Act issues are discussed extensively in this Congressional Research Service report: http://www.arcticgas.gov/sites/default/files/documents/hydraulic-fracturing-and-safe-drinking-water-act-issues.pdf See also Chapter 8 of the president’s economic report referenced above.

The Louisiana Bar Journal Vol. 59, No. 4, page 253, reports other fracking issues.

Isolate three or four such issues and report them in bullet-point form. Each point should state the issue and a brief explanation (no more than one paragraph).

Example: Dumping toxic waste—Uncontrolled dumping of toxic waste into waterways has created dead zones (places where marine and aquatic life cannot survive) worldwide, including an area in the Gulf of Mexico the size of Lake Ontario.
Provide links or citations to at least two other sources you have found that will be useful in writing about the above points. Submit your work to the Course Project Deliverables Dropbox in Week 3.

Week 4: Briefly, in 2–3 paragraphs, answer the following: What is Pennsylvania Act 13? Compare it to Vermont’s May 2012 legislation: http://www.leg.state.vt.us/docs/2012/Bills/Intro/H-464.pdf Compare these with the New York State decision on local control of fracking found in Doc Sharing at .

Using the studies, such as The Final Report on Unconventional Gas in Europe, write a brief 1–2 paragraph statement that discusses at least one specific country’s regulations (see page 5 for general information and pages 48, 49, and 50 for country-specific information.)

On April 13, 2012, President Obama issued this executive order; briefly, in 1–2 paragraphs, explain what the order provides. You can find the executive order at this address (or look in Doc Sharing).

http://www.whitehouse.gov/the-press-office/2012/04/13/executive-order-supporting-safe-and-responsible-development-unconvention

Provide links or citations to at least two other sources you have found that will be useful in writing about the above points. Submit your work to the Course Project Deliverables Dropbox in Week 4.

Week 6—Submit your final paper by placing it in the Dropbox for Week 6.

Grading Rubrics
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Category
Points
%
Description
First Deliverable

Second Deliverable

Third Deliverable
10

10

10
19
See Precise instructions under Milestones.

Deliverables are due in Weeks 2, 3, and 4.

Final Paper is due in Week 6.
Documentation and Formatting
16
10

Organization and Cohesiveness
18
11

Editing
16
10

Content
80
50

Total

100
A quality paper will meet or exceed all of the above requirements.
Best Practices
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Begin by getting an overall view of your subject. Do some general reading on hydraulic fracturing; learn what it is and why it is important. Understand the process and its impact on energy issues and environmental issues.

Pay attention to the weekly deliverables. They will not only help you to learn about the subject in an organized way, they will also help to form a foundation for your paper.

Before you begin to write, think about how you want to organize your paper. Many students prepare an outline; you should at least jot down the important points you plan to cover. If you are having trouble getting started, begin by writing the section you find easiest or most interesting—you can organize and assemble the sections of the paper into their proper order later.

After you’ve completed your first draft, put the paper aside for a day—or at least a few hours. Then go back and read your material—is it well-organized? Have you covered all the important points? Does the work flow? Are transitions smooth? Do sections need editing? Are they clear? Are they too short; too long? Once you feel that content is okay, go back and proofread the paper; look carefully for spelling and grammar errors. Do not depend on spell-check to find all spelling errors—if you don’t believe me, run this sentence through spell-check: “ If yew us only spell-check, yew can never no for sure that their r know spelling miss takes.”

Finally, cite-check your paper. Don’t try to revise, edit, proofread, and cite-check all at one time. You will miss something. Your introduction should get the reader’s attention. Introduce the subject and say why it’s important. (“Hydraulic fracturing could yield a natural gas supply to meet all U.S. needs for the next 100 years.”) In this first paragraph or two, preview the main ideas—give a map of your paper to the reader. (“In this paper I will discuss A and B and show how C will play an important role in the future.”) Be sure to maintain an academic tone. Don’t use slang. Don’t use familiar terms. (Don’t write: “It was completely stupid of XYZ not to follow the rules.” Do write: “XYZ Corporation made a fatally careless move in failing to follow EPA regulations.”)

Make the body of your paper readable by using subheads. Organize the body of the paper to conform to the map you used in the introduction. As you shift sub-topics, be sure to let the reader know where you’re headed. Remember to give credit if you use photos, graphs, maps, etc. Your summary should recapitulate the main ideas and main points in the paper.

Complete the following, placing it in a single Word document: You have successfully held your first training session on the common law tradition and sources of law! Now that everyone has an understanding of the origins of law, your next primer in this training series will explain the specifics of your state’s court system. You must first perform the necessary research to locate your state court’s website on the Internet. Once you have located your state court’s website, you will prepare a 2–3-page, double-spaced paper outlining the basic structure of your state’s court system in each county (or city). Include in your discussion an explanation of the jurisdiction (authority to hear cases) of these various trial courts. Specifically, explain in what trial court(s) in the state you would file specific types of claims. Additionally, explain the structure of the appellate courts in your state, naming each level of appeals court, if there is more than one level. Be sure to identify your sources (website, etc.). Note: Please be sure you refer to the numbers that appear on the actual printed pages in your electronic readings, not the numbers that appear with the navigation icons. (Note: Different states have different names for the primary trial court of each county, such as Superior Court, Municipal Court, Court of Common Pleas, etc., and some states have multiple courts in every county, such as Municipal Court, Family Court, Probate Court, and Small Claims Court. If you are having trouble locating your local court’s site, you may choose a neighboring state.) Use library and Internet resources. You can use the following website as a good starting point: http://www.findlaw.com/11stategov/index.html. Be sure to submit your work to the Week 2 Assignments Dropbox.

Complete the following, placing it in a single Word document: You have successfully held your first training session on the common law tradition and sources of law! Now that everyone has an understanding of the origins of law, your next primer in this training series will explain the specifics of your state’s court system. You must first perform the necessary research to locate your state court’s website on the Internet. Once you have located your state court’s website, you will prepare a 2–3-page, double-spaced paper outlining the basic structure of your state’s court system in each county (or city). Include in your discussion an explanation of the jurisdiction (authority to hear cases) of these various trial courts. Specifically, explain in what trial court(s) in the state you would file specific types of claims. Additionally, explain the structure of the appellate courts in your state, naming each level of appeals court, if there is more than one level. Be sure to identify your sources (website, etc.). Note: Please be sure you refer to the numbers that appear on the actual printed pages in your electronic readings, not the numbers that appear with the navigation icons. (Note: Different states have different names for the primary trial court of each county, such as Superior Court, Municipal Court, Court of Common Pleas, etc., and some states have multiple courts in every county, such as Municipal Court, Family Court, Probate Court, and Small Claims Court. If you are having trouble locating your local court’s site, you may choose a neighboring state.) Use library and Internet resources. You can use the following website as a good starting point: http://www.findlaw.com/11stategov/index.html. Be sure to submit your work to the Week 2 Assignments Dropbox.

1 – A lot has been made of dream interpretation. Why do you think that people are so interested in dreams? What do the theories presented in the text add to your understanding of your own dreams? 2 -Despite the evidence that sleep is greatly improved by stimulus control techniques and sleep hygiene, why do you think most people focus on biological interventions (like PM capsules) to induce sleep.

1 – A lot has been made of dream interpretation. Why do you think that people are so interested in dreams? What do the theories presented in the text add to your understanding of your own dreams?

2 -Despite the evidence that sleep is greatly improved by stimulus control techniques and sleep hygiene, why do you think most people focus on biological interventions (like PM capsules) to induce sleep.

Respond to this question: Is a false negative preferable to a false positive? For the following scenarios, state which would be preferable, a false positive or a false negative. Give the reason behind your opinion. Using a test of basic math skills to select grocery store cashiers Using an integrity test to select bank teller trainees Using the SAT or ACT to select college students Using letters of recommendation to select students for a scholarship Using the MMPI to determine whether an individual needs psychological treatment Using a test of physical ability to select firefighters Using a drug test in the selection of airline pilots

Respond to this question: Is a false negative preferable to a false positive? For the following scenarios, state which would be preferable, a false positive or a false negative. Give the reason behind your opinion.
Using a test of basic math skills to select grocery store cashiers
Using an integrity test to select bank teller trainees
Using the SAT or ACT to select college students
Using letters of recommendation to select students for a scholarship
Using the MMPI to determine whether an individual needs psychological treatment
Using a test of physical ability to select firefighters
Using a drug test in the selection of airline pilots

What are the threats to internal validity for this article. Explain How they influenced the results. Quote the article and use examples from the article -eg: -Demand characteristics? -maturation? -history? -experimenter bias? -selection bias?

What are the threats to internal validity for this article. Explain How they influenced the results. Quote the article and use examples from the article

-eg:
-Demand characteristics?
-maturation?
-history?
-experimenter bias?
-selection bias?

1) Refers to situations wherein the agent can take unseen actions for personal benefit even though such actions are costly to the principal. A. adverse selection B. moral hazard C. zero-sum game D. The Behavioral Principle 2) Which of the following statements is true? A. A call option analyzes conflicts of interest and behavior in a principal-agent relationship. B. The difference between the value of one action and the value of the best alternative is called an opportunity cost. C. An agent-manager can never make bad decisions. D. A security is a claim issued by a firm that pays owners interest but not dividends. 3) Refers to situations wherein the agent can take unseen actions for personal benefit even though such actions are costly to the principal. A. adverse selection B. moral hazard C. zero-sum game D. The Behavioral Principle 4) The annual report refers to A. a report issued annually by managers to primarily convey information about select working capital ratios. B. the length of time remaining until an asset’s maturity. C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. D. the extent to which something can be sold for cash quickly and easily without loss of value. 5) Remaining maturity refers to: A. the length of an asset’s life when it is issued. B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. D. the amount of time remaining until its maturity. 6) Generally accepted accounting principles (GAAP) refers to A. the length of an asset’s life when it is issued. B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. D. the extent to which something can be sold for cash quickly and easily without loss of value. 7) Original maturity refers to: A. the length of an asset’s life when it is issued. B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity. D. the net amount (net book value) for something shown in quarterly accounting statements. 8) The firm’s assets in the balance sheet refer to: A. the extent to which something can be sold for cash quickly and easily without loss of value. B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity). C. the productive resources in the firm’s operations 9) Book value (or Net book value) refers to: A. the length of an asset’s life when it is issued. B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity). C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity. D. the net amount shown in the accounting statements. 10) Preferred stock payment obligations are typically __________. A. viewed like debt obligations. B. issued with a maturity date. C. valued as an annuity. D. none of these 11) If the yield to maturity for a bond is less than the bond’s coupon rate, then the market value of the bond is __________. A. greater than the par value. B. equal to the par value. C. cannot tell D. less than the par value. 12) Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true? A. The current yield was a lot less than 9% when the bond was first issued B. The market value of the bond is more than $1,000 C. The market value of the bond is less than $1,000 D. The current yield was a lot greater than 9% when the bond was first issued 13) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________. A. lower transaction costs. B. expropriation risk. C. firm-specific risk. D. all of these 14) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________. A. non-listing of foreign securities on U.S. stock exchanges. B. foreign tax considerations. C. efficiency in converting currencies. D. all of these 15) According to the CAPM, the expected return for a portfolio is determined by the portfolio’s. A. variance. B. beta. C. standard deviation. D. none of these 16) Which of these investments would you expect to have the highest rate of return for the next 20 years? A. U.S. Treasury bills B. intermediate-term U.S. government bonds C. anybody’s guess D. long-term corporate bonds 17) The Principle of __________ implies that the expected return for an asset equals its required return. A. Capital Market Efficiency B. Comparative Advantage C. Signaling D. Risk-Return Trade-Off 18) According to the Principle of Risk-Return Trade-Off, investors require a higher return to compensate for __________. A. lack of diversification B. less risk C. greater risk D. diversification 19) __________ says to calculate the incremental after-tax cash flows connected with working capital decisions. A. The Signaling Principle B. The Principle of Incremental Benefits C. The Principle of Time Value of Money D. The Options Principle 20) Stony Products has a payables turnover of six times. What is Stony’s payables deferral period (PDP)? A. about 30.42 days B. about 56.50 days C. about 60.83 days D. none of these 21) Stony Products has an inventory conversion period (ICP) of about 60.83 days. The receivables collection period (RCP) is 36.50 days. The payables deferral period (PDP) is about 30.42 days. What is Stony’s cash conversion cycle (CCC)? A. about 66 days B. about 67 days C. about 68 days D. about 69 days 22) Bank term loans represent __________. A. long-term loans that looks like short-term debt B. loans for specified amounts that require borrowers to repay them according to specified schedules C. the pledge of receivables D. all of these 23) Firms make short-term financial decisions just about every day solving such questions as __________. A. Where should we borrow? B. Where should we invest our cash? C. How much liquidity should we have? D. all of these 25) Which (if any) of the following statements is false? A. When invoices are numerous, a firm may use statement billing instead of invoice billing. B. With statement billing, all of the sales for a period such as a month (for which a customer receives invoices, too) are collected into a single statement and sent to the customer as one bill. C. CIA (cash in advance) refers to when the shipper collects the payment (on behalf of the seller) upon delivery. D. none of these 26) Which of the following statements is (are) true? A. The “dating 120” or the “60 extra” mean that the clock does not start until 120 or 60 days after the invoice date. B. Prox or proximate refers to the next month. C. Invoices with “10th prox” must be paid by the 10th of the next month. D. all of these 27) Credit-policy decisions involve all aspects of receivables management. The decision does NOT include which of the following? A. setting evaluation methods and credit standards B. the choice of credit terms C. monitoring receivables and avoiding actions for slow payment D. controlling and administering the firm’s credit functions 28) Main sources of short-term funds include __________. A. trade credit and commercial paper B. futures and bank loans C. bonds and trade credit D. none of these 29) Which (if any) of the following statements is false? A. The invoice is a written statement about goods that were ordered, along with their prices and the payment dates. In other words, the invoice is simply the bill for purchases. B. For the 4/10, net 40 credit terms, you are offering a total credit period of 30 days from the date of the invoice, a discount period of 10 days, and a 4% discount if paid on or before the discount period expires. C. When a firm is using invoice billing, the invoice that accompanies shipment is a separate bill to be paid. D. none of these 30) An investor’s risky portfolio is made up of individual stocks. Which of the following statements about this portfolio is true? A. Each stock in the portfolio has its own beta. B. Each stock in the portfolio will have a beta greater than one. C. An investor cannot change the risk of this portfolio by her choice about personal leverage (lending or borrowing). D. Selling any stock in this portfolio will lower the beta of the portfolio. 31) An investor’s risky portfolio is made up of individual stocks. Which of the following statements about this portfolio is true? a. Each stock in the portfolio has its own beta. b. Each stock contributes to the beta of the portfolio. c. An investor can lower the risk of this portfolio by her choice about personal leverage (lending or borrowing). d. all of these 32) The weighted average cost of capital (WACC) can be computed using the formula: WACC = (1 – L)re + L(1 – T)rd. Which of the following statements is true? a. L is debt divided by firm value. b. T is the personal tax rate. c. rd is the required return on equity. d. none of these 33) You are considering the capital budgeting project j with a life expectancy of 20 years. The short-term government rate (rf) is 5%, the beta of firms that produce products similar to project j is 1.2, and the return on the market (rm) the last 20 years has been 10%. What is the cost of capital for this project? a. 9.00% b. 10.00% c. 11.00% d. cannot tell 34) Calculate the IRR for the following investment project: initial investment is $75,000; inflows are $20,000 for the next five years; required rate of return is 15%. (Round your answer to the nearest whole percentage) a. 10% b. 11% c. 12% d. 13% 35) Your firm uses the payback method but does not discount any of the cash flows. Calculate the payback for the following investment: A machine costs $200,000 with after-tax installation costs of $15,000. After-tax cash inflows are expected to be 36,000 per year for the next seven years. a. greater than 6 b. 5.85 years c. 5.14 years d. 4.42 years 36) Compute the NPV for the following project. The initial cost is $5,000. The net cash flows are $1,900 for four years. The net salvage value is $1,000 when the project terminates. The cost of capital is 10%. a. $1,705.76 b. $5,000.00 c. $6,705.76 d. none of these 37) Each year for eight years, an investment will generate incremental sales of $8,000 and cash operating expenses of $2,500. The applicable tax rate is 30% and depreciation is $2,000. What is the net cash flows for each of the eight years? a. $8,000 b. $6,500 c. $4,500 d. none of these 38) Which of the following favors a high dividend payout policy? A. no legal restrictions B. policy restrictions affecting trust and endowment funds C. higher taxes D. all of these 39) There can be a variety of motives for stock repurchases including __________. A. a decrease in anticipated earnings. B. a buyback of undervalued stock. C. a decrease in leverage. D. all of these 40) Some countries have __________ in which shareholders’ returns are not fully taxed twice. A. an imputation tax system B. a split tax system C. a two-tier tax system D. none of these 41) Compute the IRR for the following project. The initial cost is $10,000. The net cash flows are 3,800 for four years. The net salvage value is $2,000 when the project terminates. The cost of capital is 10%. a. 13.91% b. 18.91% c. 23.91% d. 25.91% 42) There are two important tax considerations for a capital budgeting project. These include which (if any) of the following? A. It is indeed cash flow that’s irrelevant. B. The standard cash flow estimation does not explicitly identify the financing costs. C. The Principle of Incremental Benefits reminds us that it is the incremental cash flow that’s relevant. D. none of these 43) Net present value ( NPV) is the difference between __________. A. what a capital budgeting project produces and what it is pays B. what a capital budgeting project produces and what it is worth (its market value) C. what a capital budgeting project costs and what it is worth (its market value) D. cash flows before taxes and cash flows after taxes 44) The Principle of Self-Interested Behavior says __________. A. to look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it. B. to calculate the net advantage of leasing based on the incremental after-tax benefits that leasing will provide. C. that leasing transfers the tax benefits of ownership from the lessee to the lessor. D. to use discounted cash flow analysis to compare the costs and benefits of leasing, relative to the alternative of borrowing and buying. 45) __________ says to transfer the tax benefits of ownership to other parties if they are willing to pay for benefits your firm cannot use. A. The Principle of Incremental Benefits B. The Principle of Two-Sided Transactions C. The Capital Market Efficiency Principle D. The Principle of Comparative Advantage 46) The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of production is $0.50 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 5.0 million loaves in the next year. What additional revenues minus expenses will be generated from expansion? A. $25,000 B. $250,000 C. $550,000 D. none of these 47) In efficient markets, as in the United States, you should think long and hard before you conclude that a market price is __________. A. wrong. B. fair. C. followed by many analysts. D. all of these 48) Which of the following statements is true? A. Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing from outside sources. B. Hard capital rationing refers to the rationing imposed internally by the firm. C. A post audit is a set of procedures for evaluating a capital budgeting decision after the fact. D. all of these 49) Due to asymmetric information, the market fears that a firm issuing securities will do so when the stock is ___________. A. undervalued. B. overvalued. C. caught up in a bear market. D. being sold by insiders. 50) __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows of alternative decisions. A. The Signaling Principle B. The Principle of Incremental Benefits C. The Principle of Risk-Return Trade-Off D. The Time Value of Money Principle 51) __________ says to use common industry practices as a good starting place for the planning process. A. The Principle of Incremental Benefits B. The Principle of Self-Interested Behavior C. The Principle of Valuable Ideas D. The Behavioral Principle 52) __________ says to carefully evaluate and monitor the financial plan’s impact on the firm and its stakeholders. A. The Principle of Risk-Return Trade-Off B. The Principle of Capital Market Efficiency C. The Principle of Self-Interested Behavior D. The Principle of Diversification 53) __________ says to recognize the value of hidden options in a situation, such as the foreign exchange options in some derivative instruments. A. The Options Principle B. The Principle of Comparative Advantage C. The Principle of Two-Sided Transactions D. The Time Value of Money Principle 54) __________ says to look for opportunities to invest in positive-NPV projects in foreign markets or to develop derivatives or design arrangements that enable firms to cope better with the risks they face in their foreign operations. A. The Principle of Risk-Return Trade-off B. The Principle of Diversification C. The Principle of Capital Market Efficiency D. The Principle of Valuable Ideas 55) “Hard” capital rationing refers to the rationing __________. A. imposed by external factors B. imposed internally by the shareholders C. always imposed by competitors D. always imposed by debt holders 56) Which of the following statements is true? A. The Principle of Capital Market Efficiency says to consider the possible ways to minimize the value lost to capital market imperfections, such as asymmetric taxes, asymmetric information, and transaction costs. B. The Behavioral Principle suggests to look for opportunities to create value by issuing securities that are in short supply, perhaps resulting from changes in tax law. C. The Signaling Principle says to consider any possible change in capital structure carefully, because financing transactions and capital structure changes convey information to outsiders and can be misunderstood. D. all of these 57) __________ says to seek out investments that offer the greatest expected risk-adjusted real return. A. The Principle of Self-Interested Behavior B. The Principle of Incremental Benefits C. The Signaling Principle D. The Principle of Valuable Ideas 58) Under capital rationing, a good tool to use is the __________. A. PI method B. IRR method C. payback method D. NPV method

1) Refers to situations wherein the agent can take unseen actions for personal benefit even though such actions are costly to the principal.
A. adverse selection
B. moral hazard
C. zero-sum game
D. The Behavioral Principle

2) Which of the following statements is true?
A. A call option analyzes conflicts of interest and behavior in a principal-agent relationship.
B. The difference between the value of one action and the value of the best alternative is called an opportunity cost.
C. An agent-manager can never make bad decisions.
D. A security is a claim issued by a firm that pays owners interest but not dividends.

3) Refers to situations wherein the agent can take unseen actions for personal benefit even though such actions are costly to the principal.
A. adverse selection
B. moral hazard
C. zero-sum game
D. The Behavioral Principle

4) The annual report refers to
A. a report issued annually by managers to primarily convey information about select working capital ratios.
B. the length of time remaining until an asset’s maturity.
C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes.
D. the extent to which something can be sold for cash quickly and easily without loss of value.

5) Remaining maturity refers to:
A. the length of an asset’s life when it is issued.
B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes.
D. the amount of time remaining until its maturity.

6) Generally accepted accounting principles (GAAP) refers to
A. the length of an asset’s life when it is issued.
B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes.
D. the extent to which something can be sold for cash quickly and easily without loss of value.

7) Original maturity refers to:
A. the length of an asset’s life when it is issued.
B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity.
D. the net amount (net book value) for something shown in quarterly accounting statements.

8) The firm’s assets in the balance sheet refer to:
A. the extent to which something can be sold for cash quickly and easily without loss of value.
B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity).
C. the productive resources in the firm’s operations

9) Book value (or Net book value) refers to:
A. the length of an asset’s life when it is issued.
B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity).
C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity.
D. the net amount shown in the accounting statements.

10) Preferred stock payment obligations are typically __________.
A. viewed like debt obligations.
B. issued with a maturity date.
C. valued as an annuity.
D. none of these

11) If the yield to maturity for a bond is less than the bond’s coupon rate, then the market value of the bond is __________.
A. greater than the par value.
B. equal to the par value.
C. cannot tell
D. less than the par value.

12) Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true?
A. The current yield was a lot less than 9% when the bond was first issued
B. The market value of the bond is more than $1,000
C. The market value of the bond is less than $1,000
D. The current yield was a lot greater than 9% when the bond was first issued

13) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________.
A. lower transaction costs.
B. expropriation risk.
C. firm-specific risk.
D. all of these

14) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________.
A. non-listing of foreign securities on U.S. stock exchanges.
B. foreign tax considerations.
C. efficiency in converting currencies.
D. all of these

15) According to the CAPM, the expected return for a portfolio is determined by the portfolio’s.
A. variance.
B. beta.
C. standard deviation.
D. none of these

16) Which of these investments would you expect to have the highest rate of return for the next 20 years?
A. U.S. Treasury bills
B. intermediate-term U.S. government bonds
C. anybody’s guess
D. long-term corporate bonds

17) The Principle of __________ implies that the expected return for an asset equals its required return.
A. Capital Market Efficiency
B. Comparative Advantage
C. Signaling
D. Risk-Return Trade-Off

18) According to the Principle of Risk-Return Trade-Off, investors require a higher return to compensate for __________.
A. lack of diversification
B. less risk
C. greater risk
D. diversification

19) __________ says to calculate the incremental after-tax cash flows connected with working capital decisions.
A. The Signaling Principle
B. The Principle of Incremental Benefits
C. The Principle of Time Value of Money
D. The Options Principle

20) Stony Products has a payables turnover of six times. What is Stony’s payables deferral period (PDP)?
A. about 30.42 days
B. about 56.50 days
C. about 60.83 days
D. none of these

21) Stony Products has an inventory conversion period (ICP) of about 60.83 days. The receivables collection period (RCP) is 36.50 days. The payables deferral period (PDP) is about 30.42 days. What is Stony’s cash conversion cycle (CCC)?
A. about 66 days
B. about 67 days
C. about 68 days
D. about 69 days

22) Bank term loans represent __________.
A. long-term loans that looks like short-term debt
B. loans for specified amounts that require borrowers to repay them according to specified schedules
C. the pledge of receivables
D. all of these

23) Firms make short-term financial decisions just about every day solving such questions as __________.
A. Where should we borrow?
B. Where should we invest our cash?
C. How much liquidity should we have?
D. all of these

25) Which (if any) of the following statements is false?
A. When invoices are numerous, a firm may use statement billing instead of invoice billing.
B. With statement billing, all of the sales for a period such as a month (for which a customer receives invoices, too) are collected into a single statement and sent to the customer as one bill.
C. CIA (cash in advance) refers to when the shipper collects the payment (on behalf of the seller) upon delivery.
D. none of these

26) Which of the following statements is (are) true?
A. The “dating 120” or the “60 extra” mean that the clock does not start until 120 or 60 days after the invoice date.
B. Prox or proximate refers to the next month.
C. Invoices with “10th prox” must be paid by the 10th of the next month.
D. all of these

27) Credit-policy decisions involve all aspects of receivables management. The decision does NOT include which of the following?
A. setting evaluation methods and credit standards
B. the choice of credit terms
C. monitoring receivables and avoiding actions for slow payment
D. controlling and administering the firm’s credit functions

28) Main sources of short-term funds include __________.
A. trade credit and commercial paper
B. futures and bank loans
C. bonds and trade credit
D. none of these

29) Which (if any) of the following statements is false?
A. The invoice is a written statement about goods that were ordered, along with their prices and the payment dates. In other words, the invoice is simply the bill for purchases.
B. For the 4/10, net 40 credit terms, you are offering a total credit period of 30 days from the date of the invoice, a discount period of 10 days, and a 4% discount if paid on or before the discount period expires.
C. When a firm is using invoice billing, the invoice that accompanies shipment is a separate bill to be paid.
D. none of these

30) An investor’s risky portfolio is made up of individual stocks. Which of the following statements about this portfolio is true?
A. Each stock in the portfolio has its own beta.
B. Each stock in the portfolio will have a beta greater than one.
C. An investor cannot change the risk of this portfolio by her choice about personal leverage (lending or borrowing).
D. Selling any stock in this portfolio will lower the beta of the portfolio.

31) An investor’s risky portfolio is made up of individual stocks. Which of the following statements about this portfolio is true?
a. Each stock in the portfolio has its own beta.
b. Each stock contributes to the beta of the portfolio.
c. An investor can lower the risk of this portfolio by her choice about personal leverage (lending or borrowing).
d. all of these

32) The weighted average cost of capital (WACC) can be computed using the formula: WACC = (1 – L)re + L(1 – T)rd. Which of the following statements is true?
a. L is debt divided by firm value.
b. T is the personal tax rate.
c. rd is the required return on equity.
d. none of these

33) You are considering the capital budgeting project j with a life expectancy of 20 years. The short-term government rate (rf) is 5%, the beta of firms that produce products similar to project j is 1.2, and the return on the market (rm) the last 20 years has been 10%. What is the cost of capital for this project?
a. 9.00%
b. 10.00%
c. 11.00%
d. cannot tell

34) Calculate the IRR for the following investment project: initial investment is $75,000; inflows are $20,000 for the next five years; required rate of return is 15%. (Round your answer to the nearest whole percentage)
a. 10%
b. 11%
c. 12%
d. 13%

35) Your firm uses the payback method but does not discount any of the cash flows. Calculate the payback for the following investment: A machine costs $200,000 with after-tax installation costs of $15,000. After-tax cash inflows are expected to be 36,000 per year for the next seven years.
a. greater than 6
b. 5.85 years
c. 5.14 years
d. 4.42 years

36) Compute the NPV for the following project. The initial cost is $5,000. The net cash flows are $1,900 for four years. The net salvage value is $1,000 when the project terminates. The cost of capital is 10%.
a. $1,705.76
b. $5,000.00
c. $6,705.76
d. none of these

37) Each year for eight years, an investment will generate incremental sales of $8,000 and cash operating expenses of $2,500. The applicable tax rate is 30% and depreciation is $2,000. What is the net cash flows for each of the eight years?
a. $8,000
b. $6,500
c. $4,500
d. none of these

38) Which of the following favors a high dividend payout policy?
A. no legal restrictions
B. policy restrictions affecting trust and endowment funds
C. higher taxes
D. all of these

39) There can be a variety of motives for stock repurchases including __________.
A. a decrease in anticipated earnings.
B. a buyback of undervalued stock.
C. a decrease in leverage.
D. all of these

40) Some countries have __________ in which shareholders’ returns are not fully taxed twice.
A. an imputation tax system
B. a split tax system
C. a two-tier tax system
D. none of these

41) Compute the IRR for the following project. The initial cost is $10,000. The net cash flows are 3,800 for four years. The net salvage value is $2,000 when the project terminates. The cost of capital is 10%.
a. 13.91%
b. 18.91%
c. 23.91%
d. 25.91%

42) There are two important tax considerations for a capital budgeting project. These include which (if any) of the following?
A. It is indeed cash flow that’s irrelevant.
B. The standard cash flow estimation does not explicitly identify the financing costs.
C. The Principle of Incremental Benefits reminds us that it is the incremental cash flow that’s relevant.
D. none of these

43) Net present value ( NPV) is the difference between __________.
A. what a capital budgeting project produces and what it is pays
B. what a capital budgeting project produces and what it is worth (its market value)
C. what a capital budgeting project costs and what it is worth (its market value)
D. cash flows before taxes and cash flows after taxes

44) The Principle of Self-Interested Behavior says __________.
A. to look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it.
B. to calculate the net advantage of leasing based on the incremental after-tax benefits that leasing will provide.
C. that leasing transfers the tax benefits of ownership from the lessee to the lessor.
D. to use discounted cash flow analysis to compare the costs and benefits of leasing, relative to the alternative of borrowing and buying.

45) __________ says to transfer the tax benefits of ownership to other parties if they are willing to pay for benefits your firm cannot use.
A. The Principle of Incremental Benefits
B. The Principle of Two-Sided Transactions
C. The Capital Market Efficiency Principle
D. The Principle of Comparative Advantage

46) The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of production is $0.50 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 5.0 million loaves in the next year. What additional revenues minus expenses will be generated from expansion?
A. $25,000
B. $250,000
C. $550,000
D. none of these

47) In efficient markets, as in the United States, you should think long and hard before you conclude that a market price is __________.
A. wrong.
B. fair.
C. followed by many analysts.
D. all of these

48) Which of the following statements is true?
A. Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing from outside sources.
B. Hard capital rationing refers to the rationing imposed internally by the firm.
C. A post audit is a set of procedures for evaluating a capital budgeting decision after the fact.
D. all of these

49) Due to asymmetric information, the market fears that a firm issuing securities will do so when the stock is ___________.
A. undervalued.
B. overvalued.
C. caught up in a bear market.
D. being sold by insiders.

50) __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows of alternative decisions.
A. The Signaling Principle
B. The Principle of Incremental Benefits
C. The Principle of Risk-Return Trade-Off
D. The Time Value of Money Principle

51) __________ says to use common industry practices as a good starting place for the planning process.
A. The Principle of Incremental Benefits
B. The Principle of Self-Interested Behavior
C. The Principle of Valuable Ideas
D. The Behavioral Principle

52) __________ says to carefully evaluate and monitor the financial plan’s impact on the firm and its stakeholders.
A. The Principle of Risk-Return Trade-Off
B. The Principle of Capital Market Efficiency
C. The Principle of Self-Interested Behavior
D. The Principle of Diversification

53) __________ says to recognize the value of hidden options in a situation, such as the foreign exchange options in some derivative instruments.
A. The Options Principle
B. The Principle of Comparative Advantage
C. The Principle of Two-Sided Transactions
D. The Time Value of Money Principle

54) __________ says to look for opportunities to invest in positive-NPV projects in foreign markets or to develop derivatives or design arrangements that enable firms to cope better with the risks they face in their foreign operations.
A. The Principle of Risk-Return Trade-off
B. The Principle of Diversification
C. The Principle of Capital Market Efficiency
D. The Principle of Valuable Ideas

55) “Hard” capital rationing refers to the rationing __________.
A. imposed by external factors
B. imposed internally by the shareholders
C. always imposed by competitors
D. always imposed by debt holders

56) Which of the following statements is true?
A. The Principle of Capital Market Efficiency says to consider the possible ways to minimize the value lost to capital market imperfections, such as asymmetric taxes, asymmetric information, and transaction costs.
B. The Behavioral Principle suggests to look for opportunities to create value by issuing securities that are in short supply, perhaps resulting from changes in tax law.
C. The Signaling Principle says to consider any possible change in capital structure carefully, because financing transactions and capital structure changes convey information to outsiders and can be misunderstood.
D. all of these

57) __________ says to seek out investments that offer the greatest expected risk-adjusted real return.
A. The Principle of Self-Interested Behavior
B. The Principle of Incremental Benefits
C. The Signaling Principle
D. The Principle of Valuable Ideas

58) Under capital rationing, a good tool to use is the __________.
A. PI method
B. IRR method
C. payback method
D. NPV method

1) Occurs when a “follower” receives the benefit of an expenditure made by a “leader” by imitating the leader’s behavior. A. free-rider problem B. The Principle of Comparative Advantage C. asymmetric information D. put option 2) Occurs when inaccurate information can falsely exist. A. moral hazard B. The Principle of Valuable Ideas C. free-rider problem D. adverse selection 3) Refers to situations wherein the agent can take unseen actions for personal benefit even though such actions are costly to the principal. A. adverse selection B. moral hazard C. zero-sum game D. The Behavioral Principle 4) The annual report refers to A. a report issued annually by managers to primarily convey information about select working capital ratios. B. the length of time remaining until an asset’s maturity. C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. D. the extent to which something can be sold for cash quickly and easily without loss of value. 5) Remaining maturity refers to: A. the length of an asset’s life when it is issued. B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. D. the amount of time remaining until its maturity. 6) Generally accepted accounting principles (GAAP) refers to A. the length of an asset’s life when it is issued. B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. D. the extent to which something can be sold for cash quickly and easily without loss of value. 7) Original maturity refers to: A. the length of an asset’s life when it is issued. B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity. D. the net amount (net book value) for something shown in quarterly accounting statements. 8) The firm’s assets in the balance sheet refer to: A. the extent to which something can be sold for cash quickly and easily without loss of value. B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity). C. the productive resources in the firm’s operations 9) Book value (or Net book value) refers to: A. the length of an asset’s life when it is issued. B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity). C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity. D. the net amount shown in the accounting statements. 10) The return expected by equity investors is called the __________. A. market capitalization rate. B. dividend yield. C. average cost of capital. D. none of these 11) Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true? A. The market value of the bond is more than $1,000 B. The current yield was a lot less than 9% when the bond was first issued C. The current yield was a lot greater than 9% when the bond was first issued D. The market value of the bond is less than $1,000 12) Preferred stock payment obligations are typically __________. A. viewed like debt obligations. B. issued with a maturity date. C. valued as an annuity. D. none of these 13) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________. A. lower transaction costs. B. less political risk. C. costs of converting currencies. D. all of these 14) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________. A. non-listing of foreign securities on U.S. stock exchanges. B. foreign tax considerations. C. efficiency in converting currencies. D. all of these 15) For diversified investors, the proper measure of a stock’s risk is __________. A. its nonsystematic risk. B. its nondiversifiable risk. C. its specific risk. D. its standard deviation. 16) One problem with using negative values for w1 (the proportion invested in the riskless asset) to represent a borrowed amount is that the implied borrowing rate of interest is the same as __________. A. the lending rate of interest B. the prime rate of interest C. the current rate of interest D. the nominal rate of interest 17) Which of these investments would you expect to have the highest rate of return for the next 20 years? A. intermediate-term U.S. government bonds B. U.S. Treasury bills C. long-term corporate bonds D. anybody’s guess 18) According to the Principle of Risk-Return Trade-Off, investors require a higher return to compensate for __________. A. less risk B. lack of diversification C. diversification D. greater risk 19) Suppose the Ruskin Oil Corporation has $150,000 for both its book balance and its bank balance. It takes 4 days for a check to clear. If Ruskin writes a $3,000 check, which of the following statements is false? A. Ruskin’s available balance is $150,000, its book balance is $147,000, and its disbursement float is $3,000. B. If Ruskin writes a $3,000 check that takes 4 days to clear, during this period, $3,000 of disbursement float has been created. C. Ruskin’s book balance declines by the amount of the check, from $150,000 to $147,000, but the bank balance is unchanged until the check clears. D. After the check clears, the book and bank balances will both be $147,000 and there is no more disbursement float. 20) Stony Products has a payables turnover of six times. What is Stony’s payables deferral period (PDP)? A. about 30.42 days B. about 56.50 days C. about 60.83 days D. none of these The payables deferral period is the average length of time between the purchase of the materials and labor that go into inventory and the payment of cash for these materials and labor. We have: PDP = where PTO is the payables turnover and is equal to: where CS is cost of sales, SGA is selling, general, and administrative expenses, AP is account payables, and WBT is wages, benefits, and payroll taxes payable. We have: PDP = = = 60.83333 days ? 60.83 days. 21) Stony Products has a receivables turnover of ten times. What is Stony’s receivables collection period (RCP)? A. about 35.42 days B. about 36.50 days C. about 40.83 days D. none of these The receivables collection period (RCP), or days’ sales outstanding (DSO), is the average number of days that it takes to collect on accounts receivable. We have: RCP = where RTO is the receivables turnover and is equal to where AR is account receivables. We have: RCP = = = 36.5 days.] 22) __________ says to calculate the incremental after-tax cash flows connected with working capital decisions. A. The Principle of Time Value of Money B. The Signaling Principle C. The Principle of Incremental Benefits D. The Options Principle 23) __________ says to compare the benefits and costs of alternative uses and sources of money using after-tax APYs. A. The Principle of Incremental Benefits B. The Principle of Time Value of Money C. The Signaling Principle D. The Options Principle 24) Bank term loans represent __________. A. long-term loans that looks like short-term debt B. loans for specified amounts that require borrowers to repay them according to specified schedules C. the pledge of receivables D. all of these 25) Which (if any) of the below statements is false? A. Higher collection costs reduce the NPV and but cannot cause it to be negative. B. A customer who is likely to make late payments is also more likely to default and to require extra collection efforts. C. Credit bureau reports give information about any legal judgments against the firm. D. none of these 26) Credit-policy decisions involve all aspects of receivables management. The decision does NOT include which of the following? A. monitoring receivables and avoiding actions for slow payment B. setting evaluation methods and credit standards C. the choice of credit terms D. controlling and administering the firm’s credit functions 27) Most credit sales are made on an open account basis, which means __________. A. that customers cannot simply purchase what they want. B. that customers simply purchase what they want. C. that suppliers dictate the terms of the purchase. D. that suppliers cannot dictate the terms of the purchase. 28) An all-equity-financed firm would __________. A. not pay corporate income taxes because it would have no interest expense. B. not pay any income taxes because interest would exactly offset its taxable income. C. pay corporate income taxes because it would have interest expense. D. pay corporate income taxes if its taxable income is positive. 29) A profitable firm would __________. A. pay corporate income taxes because it would have interest expense. B. pay corporate income taxes because it would not have interest expense. C. pay corporate income taxes if it had a positive taxable income. D. none of these 30) Whenever a firm splits itself into separate units, with each unit having limited liability with respect to its financing, the capital structure of each unit becomes __________. A. an irrelevant consideration for a cost of capital. B. the relevant consideration for a cost of capital. C. important only if the firm faces financial distress. D. none of these 31) There are two important tax considerations for a capital budgeting project. These include which (if any) of the following? A. It is indeed cash flow that’s irrelevant. B. The standard cash flow estimation does not explicitly identify the financing costs. C. The Principle of Incremental Benefits reminds us that it is the incremental cash flow that’s relevant. D. none of these 32) Projects can be classified into various categories. These include: A. maintenance expenditures projects that involve replacing worn-out or damaged equipment. B. cost savings and revenue enhancement projects that include improvements in production technology to realize cost savings and marketing campaigns to achieve revenue enhancement. C. capacity expansion projects that involve expanding the current business by adding new equipment and facilities. D. all of these 33) Ideas for capital budgeting projects come from all levels within an organization. The bottom up process results in ideas percolating through the organization. A. sideways B. downward C. upward D. any way 34) In practice, the __________ rule is preferred. A. IRR B. NPV C. PI D. Payback 35) Whenever projects are both independent and conventional, then the IRR and NPV methods agree. Which of the following statements is true? A. A mutually exclusive project is one that can be chosen independently of other projects. B. When undertaking one project prevents investing in another project, and vice versa, the projects are said to have a positive payback. C. A conventional project is a project with an initial cash outflow that is followed by one or more expected future cash inflows. D. all of these 36) The __________ method breaks down when evaluating projects in which the sign of the cash flow changes. A. IRR B. NPV C. PI D. Payback 37) Studies show systematic differences in capital structures across industries. These are due mostly to differences in __________. A. hiring and firing practices. B. the availability of tax shelter provided by things other than debt, such as accelerated depreciation, investment tax credit, and operating tax loss carryforwards. C. what the arbitrage pricing theory tells us. D. none of these 38) A firm cannot simply adopt the industry average debt ratio, because differences exist among firms in any particular industry with respect to __________. A. tax position. B. size. C. competitive position. D. all of these 39) Studies show systematic differences in capital structures across industries. These are due mostly to differences in __________. A. the ability of assets to support borrowing. B. the firm’s inventory turnover ratio. C. accounting practices. D. management’s attitude toward what other industries are doing. 40) Which of the following favors a high dividend payout policy? A. no legal restrictions B. policy restrictions affecting trust and endowment funds C. higher taxes D. all of these 41) There can be a variety of motives for stock repurchases including __________. A. a decrease in anticipated earnings. B. a buyback of undervalued stock. C. a decrease in leverage. D. all of these 42) Some countries have __________ in which shareholders’ returns are not fully taxed twice. A. an imputation tax system B. a split tax system C. a two-tier tax system D. none of these 43) Conditional sales contracts __________. A. are seldom issued to finance the purchase of aircraft B. are similar to equipment trust certificates C. enable the borrower to obtain title to the assets only before it fully repays the debt D. all of these 44) The Time Value of Money Principle says __________. A. to set a price and other terms that investors will find acceptable when issuing securities B. to use discounted cash flow analysis to compare the costs and benefits of financing decisions, such as alternative securities to sell, lease versus borrow and buy, and bond refunding C. to look for the most advantageous ways to finance the firm, such as the lowest-cost debt alternative D. that announcing the firm’s decision to issue securities conveys information about the firm 45) Stated maturity is __________. A. usually a fixed rate, but it can be a variable rate that’s adjusted according to a specified formula B. the amount the borrower must repay C. the date the borrower must repay the money it borrowed 46) The Time Value of Money Principle says to __________. A. recognize that the cancellation option in a lease is valuable to the lessee. B. use discounted cash flow analysis to compare the costs and benefits of leasing, relative to the alternative of borrowing and buying. C. look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it. D. look for profitable opportunities to arrange project financing or limit partnership financing for an asset you wish to purchase. 47) __________ says to calculate the net advantage of leasing based on the incremental after-tax benefits that leasing will provide. A. The Principle of Comparative Advantage B. The Principle of Incremental Benefits C. The Options Principle D. The Capital Market Efficiency 48) __________ says to look for opportunities to develop asset-based financing arrangements that offer new positive-NPV financing mechanisms. A. The Principle of Self-Interested Behavior B. The Principle of Comparative Advantage C. The Principle of Valuable Ideas D. The Time Value of Money Principle 49) The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of production is $0.50 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 5.0 million loaves in the next year. What additional revenues minus expenses will be generated from expansion? A. $25,000 B. $250,000 C. $550,000 D. none of these [Contribution margin = wholesale price ? variable cost = $1.00 ? $0.50 = $0.50 per loaf. The additional 5 million loaves would therefore generate an increase of $0.50 per loaf times 5 million loaves = $2,500,000 in revenues minus expenses each year.] 50) The wholesale price for Captain John’s is $3.00 per loaf. One million loaves will be sold in the next year. What is the contribution margin? A. $3,000,000 B. cannot tell C. $3,000,000 minus fixed costs D. $3.00 [We need the variable cost to determine the contribution margin which is equal to the wholesale price minus the variable cost; thus, we cannot tell.] 51) The wholesale price for Captain John’s is $0.612 per loaf, and the variable cost of production is $0.387 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 4.5 million loaves in the next five years. What additional revenues minus expenses will be generated from expansion? A. $1,012,500 B. $1,102,000 C. $1,000,500 D. $912,500 [Contribution margin = wholesale price ? variable cost = $0.612 ? $0.387 = $0.225 per loaf. The additional 4.5 million loaves would therefore generate an increase of $0.225 per loaf times 4.5 million loaves = $1,012,500 in revenues minus expenses each year.] 52) In efficient markets, as in the United States, you should think long and hard before you conclude that a market price is __________. A. wrong. B. fair. C. followed by many analysts. D. all of these 53) Due to asymmetric information, the market fears that a firm issuing securities will do so when the stock is ___________. A. caught up in a bear market. B. being sold by insiders. C. overvalued. D. undervalued. 54) Which of the following statements is true? A. Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing from outside sources. B. Hard capital rationing refers to the rationing imposed internally by the firm. C. A post audit is a set of procedures for evaluating a capital budgeting decision after the fact. D. all of these 55) __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows of alternative decisions. A. The Principle of Incremental Benefits B. The Principle of Risk-Return Trade-Off C. The Time Value of Money Principle D. The Signaling Principle 56) __________ says to carefully evaluate and monitor the financial plan’s impact on the firm and its stakeholders. A. The Principle of Capital Market Efficiency B. The Principle of Self-Interested Behavior C. The Principle of Diversification D. The Principle of Risk-Return Trade-Off 57) __________ says to use common industry practices as a good starting place for the planning process. A. The Principle of Self-Interested Behavior B. The Principle of Valuable Ideas C. The Behavioral Principle D. The Principle of Incremental Benefits

1) Occurs when a “follower” receives the benefit of an expenditure made by a “leader” by imitating the leader’s behavior.
A. free-rider problem
B. The Principle of Comparative Advantage
C. asymmetric information
D. put option

2) Occurs when inaccurate information can falsely exist.
A. moral hazard
B. The Principle of Valuable Ideas
C. free-rider problem
D. adverse selection

3) Refers to situations wherein the agent can take unseen actions for personal benefit even though such actions are costly to the principal.
A. adverse selection
B. moral hazard
C. zero-sum game
D. The Behavioral Principle

4) The annual report refers to
A. a report issued annually by managers to primarily convey information about select working capital ratios.
B. the length of time remaining until an asset’s maturity.
C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes.
D. the extent to which something can be sold for cash quickly and easily without loss of value.

5) Remaining maturity refers to:
A. the length of an asset’s life when it is issued.
B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes.
D. the amount of time remaining until its maturity.

6) Generally accepted accounting principles (GAAP) refers to
A. the length of an asset’s life when it is issued.
B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
C. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes.
D. the extent to which something can be sold for cash quickly and easily without loss of value.

7) Original maturity refers to:
A. the length of an asset’s life when it is issued.
B. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time.
C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity.
D. the net amount (net book value) for something shown in quarterly accounting statements.

8) The firm’s assets in the balance sheet refer to:
A. the extent to which something can be sold for cash quickly and easily without loss of value.
B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity).
C. the productive resources in the firm’s operations

9) Book value (or Net book value) refers to:
A. the length of an asset’s life when it is issued.
B. the statement of a firm’s financial position at one point in time, including its assets and the claims on those assets by creditors (liabilities) and owners (stockholders’ equity).
C. the price for which something could be bought or sold in a reasonable length of time, where “reasonable length of time” is defined in terms of the item’s liquidity.
D. the net amount shown in the accounting statements.

10) The return expected by equity investors is called the __________.
A. market capitalization rate.
B. dividend yield.
C. average cost of capital.
D. none of these

11) Assume that the par value of a bond is $1,000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true?
A. The market value of the bond is more than $1,000
B. The current yield was a lot less than 9% when the bond was first issued
C. The current yield was a lot greater than 9% when the bond was first issued
D. The market value of the bond is less than $1,000

12) Preferred stock payment obligations are typically __________.
A. viewed like debt obligations.
B. issued with a maturity date.
C. valued as an annuity.
D. none of these

13) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________.
A. lower transaction costs.
B. less political risk.
C. costs of converting currencies.
D. all of these

14) Certain countries have restrictions. In practice, U.S. investors have NOT invested very much internationally. Possible factors include __________.
A. non-listing of foreign securities on U.S. stock exchanges.
B. foreign tax considerations.
C. efficiency in converting currencies.
D. all of these

15) For diversified investors, the proper measure of a stock’s risk is __________.
A. its nonsystematic risk.
B. its nondiversifiable risk.
C. its specific risk.
D. its standard deviation.

16) One problem with using negative values for w1 (the proportion invested in the riskless asset) to represent a borrowed amount is that the implied borrowing rate of interest is the same as __________.
A. the lending rate of interest
B. the prime rate of interest
C. the current rate of interest
D. the nominal rate of interest

17) Which of these investments would you expect to have the highest rate of return for the next 20 years?
A. intermediate-term U.S. government bonds
B. U.S. Treasury bills
C. long-term corporate bonds
D. anybody’s guess

18) According to the Principle of Risk-Return Trade-Off, investors require a higher return to compensate for __________.
A. less risk
B. lack of diversification
C. diversification
D. greater risk

19) Suppose the Ruskin Oil Corporation has $150,000 for both its book balance and its bank balance. It takes 4 days for a check to clear. If Ruskin writes a $3,000 check, which of the following statements is false?
A. Ruskin’s available balance is $150,000, its book balance is $147,000, and its disbursement float is $3,000.
B. If Ruskin writes a $3,000 check that takes 4 days to clear, during this period, $3,000 of disbursement float has been created.
C. Ruskin’s book balance declines by the amount of the check, from $150,000 to $147,000, but the bank balance is unchanged until the check clears.
D. After the check clears, the book and bank balances will both be $147,000 and there is no more disbursement float.

20) Stony Products has a payables turnover of six times. What is Stony’s payables deferral period (PDP)?
A. about 30.42 days
B. about 56.50 days
C. about 60.83 days
D. none of these

The payables deferral period is the average length of time between the purchase of the materials and labor that go into inventory and the payment of cash for these materials and labor. We have: PDP = where PTO is the payables turnover and is equal to:
where CS is cost of sales, SGA is selling, general, and administrative expenses, AP is account payables, and WBT is wages, benefits, and payroll taxes payable. We have: PDP = = = 60.83333 days ? 60.83 days.

21) Stony Products has a receivables turnover of ten times. What is Stony’s receivables collection period (RCP)?
A. about 35.42 days
B. about 36.50 days
C. about 40.83 days
D. none of these

The receivables collection period (RCP), or days’ sales outstanding (DSO), is the average number of days that it takes to collect on accounts receivable. We have: RCP =
where RTO is the receivables turnover and is equal to where AR is account receivables. We have: RCP = = = 36.5 days.]

22) __________ says to calculate the incremental after-tax cash flows connected with working capital decisions.
A. The Principle of Time Value of Money
B. The Signaling Principle
C. The Principle of Incremental Benefits
D. The Options Principle

23) __________ says to compare the benefits and costs of alternative uses and sources of money using after-tax APYs.
A. The Principle of Incremental Benefits
B. The Principle of Time Value of Money
C. The Signaling Principle
D. The Options Principle

24) Bank term loans represent __________.
A. long-term loans that looks like short-term debt
B. loans for specified amounts that require borrowers to repay them according to specified schedules
C. the pledge of receivables
D. all of these

25) Which (if any) of the below statements is false?
A. Higher collection costs reduce the NPV and but cannot cause it to be negative.
B. A customer who is likely to make late payments is also more likely to default and to require extra collection efforts.
C. Credit bureau reports give information about any legal judgments against the firm.
D. none of these

26) Credit-policy decisions involve all aspects of receivables management. The decision does NOT include which of the following?
A. monitoring receivables and avoiding actions for slow payment
B. setting evaluation methods and credit standards
C. the choice of credit terms
D. controlling and administering the firm’s credit functions

27) Most credit sales are made on an open account basis, which means __________.
A. that customers cannot simply purchase what they want.
B. that customers simply purchase what they want.
C. that suppliers dictate the terms of the purchase.
D. that suppliers cannot dictate the terms of the purchase.

28) An all-equity-financed firm would __________.
A. not pay corporate income taxes because it would have no interest expense.
B. not pay any income taxes because interest would exactly offset its taxable income.
C. pay corporate income taxes because it would have interest expense.
D. pay corporate income taxes if its taxable income is positive.

29) A profitable firm would __________.
A. pay corporate income taxes because it would have interest expense.
B. pay corporate income taxes because it would not have interest expense.
C. pay corporate income taxes if it had a positive taxable income.
D. none of these

30) Whenever a firm splits itself into separate units, with each unit having limited liability with respect to its financing, the capital structure of each unit becomes __________.
A. an irrelevant consideration for a cost of capital.
B. the relevant consideration for a cost of capital.
C. important only if the firm faces financial distress.
D. none of these

31) There are two important tax considerations for a capital budgeting project. These include which (if any) of the following?
A. It is indeed cash flow that’s irrelevant.
B. The standard cash flow estimation does not explicitly identify the financing costs.
C. The Principle of Incremental Benefits reminds us that it is the incremental cash flow that’s relevant.
D. none of these

32) Projects can be classified into various categories. These include:
A. maintenance expenditures projects that involve replacing worn-out or damaged equipment.
B. cost savings and revenue enhancement projects that include improvements in production technology to realize cost savings and marketing campaigns to achieve revenue enhancement.
C. capacity expansion projects that involve expanding the current business by adding new equipment and facilities.
D. all of these

33) Ideas for capital budgeting projects come from all levels within an organization. The bottom up process results in ideas percolating through the organization.
A. sideways
B. downward
C. upward
D. any way

34) In practice, the __________ rule is preferred.
A. IRR
B. NPV
C. PI
D. Payback

35) Whenever projects are both independent and conventional, then the IRR and NPV methods agree. Which of the following statements is true?
A. A mutually exclusive project is one that can be chosen independently of other projects.
B. When undertaking one project prevents investing in another project, and vice versa, the projects are said to have a positive payback.
C. A conventional project is a project with an initial cash outflow that is followed by one or more expected future cash inflows.
D. all of these

36) The __________ method breaks down when evaluating projects in which the sign of the cash flow changes.
A. IRR
B. NPV
C. PI
D. Payback

37) Studies show systematic differences in capital structures across industries. These are due mostly to differences in __________.
A. hiring and firing practices.
B. the availability of tax shelter provided by things other than debt, such as accelerated depreciation, investment tax credit, and operating tax loss carryforwards.
C. what the arbitrage pricing theory tells us.
D. none of these

38) A firm cannot simply adopt the industry average debt ratio, because differences exist among firms in any particular industry with respect to __________.
A. tax position.
B. size.
C. competitive position.
D. all of these

39) Studies show systematic differences in capital structures across industries. These are due mostly to differences in __________.
A. the ability of assets to support borrowing.
B. the firm’s inventory turnover ratio.
C. accounting practices.
D. management’s attitude toward what other industries are doing.

40) Which of the following favors a high dividend payout policy?
A. no legal restrictions
B. policy restrictions affecting trust and endowment funds
C. higher taxes
D. all of these

41) There can be a variety of motives for stock repurchases including __________.
A. a decrease in anticipated earnings.
B. a buyback of undervalued stock.
C. a decrease in leverage.
D. all of these

42) Some countries have __________ in which shareholders’ returns are not fully taxed twice.
A. an imputation tax system
B. a split tax system
C. a two-tier tax system
D. none of these

43) Conditional sales contracts __________.
A. are seldom issued to finance the purchase of aircraft
B. are similar to equipment trust certificates
C. enable the borrower to obtain title to the assets only before it fully repays the debt
D. all of these

44) The Time Value of Money Principle says __________.
A. to set a price and other terms that investors will find acceptable when issuing securities
B. to use discounted cash flow analysis to compare the costs and benefits of financing decisions, such as alternative securities to sell, lease versus borrow and buy, and bond refunding
C. to look for the most advantageous ways to finance the firm, such as the lowest-cost debt alternative
D. that announcing the firm’s decision to issue securities conveys information about the firm

45) Stated maturity is __________.
A. usually a fixed rate, but it can be a variable rate that’s adjusted according to a specified formula
B. the amount the borrower must repay
C. the date the borrower must repay the money it borrowed

46) The Time Value of Money Principle says to __________.
A. recognize that the cancellation option in a lease is valuable to the lessee.
B. use discounted cash flow analysis to compare the costs and benefits of leasing, relative to the alternative of borrowing and buying.
C. look for profitable opportunities to lease (or rent) an asset, rather than borrow and buy it.
D. look for profitable opportunities to arrange project financing or limit partnership financing for an asset you wish to purchase.

47) __________ says to calculate the net advantage of leasing based on the incremental after-tax benefits that leasing will provide.
A. The Principle of Comparative Advantage
B. The Principle of Incremental Benefits
C. The Options Principle
D. The Capital Market Efficiency

48) __________ says to look for opportunities to develop asset-based financing arrangements that offer new positive-NPV financing mechanisms.
A. The Principle of Self-Interested Behavior
B. The Principle of Comparative Advantage
C. The Principle of Valuable Ideas
D. The Time Value of Money Principle

49) The wholesale price for Captain John’s is $1.00 per loaf, and the variable cost of production is $0.50 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 5.0 million loaves in the next year. What additional revenues minus expenses will be generated from expansion?
A. $25,000
B. $250,000
C. $550,000
D. none of these

[Contribution margin = wholesale price ? variable cost = $1.00 ? $0.50 = $0.50 per loaf. The additional 5 million loaves would therefore generate an increase of $0.50 per loaf times 5 million loaves = $2,500,000 in revenues minus expenses each year.]

50) The wholesale price for Captain John’s is $3.00 per loaf. One million loaves will be sold in the next year. What is the contribution margin?
A. $3,000,000
B. cannot tell
C. $3,000,000 minus fixed costs
D. $3.00

[We need the variable cost to determine the contribution margin which is equal to the wholesale price minus the variable cost; thus, we cannot tell.]

51) The wholesale price for Captain John’s is $0.612 per loaf, and the variable cost of production is $0.387 per loaf. Captain John’s is expecting that expansion will allow them to sell an additional 4.5 million loaves in the next five years. What additional revenues minus expenses will be generated from expansion?
A. $1,012,500
B. $1,102,000
C. $1,000,500
D. $912,500

[Contribution margin = wholesale price ? variable cost = $0.612 ? $0.387 = $0.225 per loaf. The additional 4.5 million loaves would therefore generate an increase of $0.225 per loaf times 4.5 million loaves = $1,012,500 in revenues minus expenses each year.]

52) In efficient markets, as in the United States, you should think long and hard before you conclude that a market price is __________.
A. wrong.
B. fair.
C. followed by many analysts.
D. all of these

53) Due to asymmetric information, the market fears that a firm issuing securities will do so when the stock is ___________.
A. caught up in a bear market.
B. being sold by insiders.
C. overvalued.
D. undervalued.

54) Which of the following statements is true?
A. Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing from outside sources.
B. Hard capital rationing refers to the rationing imposed internally by the firm.
C. A post audit is a set of procedures for evaluating a capital budgeting decision after the fact.
D. all of these

55) __________ says to forecast the firm’s cash flows, and analyze the incremental cash flows of alternative decisions.
A. The Principle of Incremental Benefits
B. The Principle of Risk-Return Trade-Off
C. The Time Value of Money Principle
D. The Signaling Principle

56) __________ says to carefully evaluate and monitor the financial plan’s impact on the firm and its stakeholders.
A. The Principle of Capital Market Efficiency
B. The Principle of Self-Interested Behavior
C. The Principle of Diversification
D. The Principle of Risk-Return Trade-Off

57) __________ says to use common industry practices as a good starting place for the planning process.
A. The Principle of Self-Interested Behavior
B. The Principle of Valuable Ideas
C. The Behavioral Principle
D. The Principle of Incremental Benefits

Week 1 Discussion 1 “Make It Real.” Please respond to the following: Choose and describe two (2) “real-world” best practices a budget analyst should strive to apply. Choose and describe two (2) worst practices a budget analyst should avoid. State whether you think the choices of best and worst practices depend on the level of government in which the budget analyst serves. Justify your answer. Week 1 Discussion 2 “Debate It!—Privatization.” Please respond to the following: Take a position on the topic, articulate it clearly, support it, and defend it during the debate. Privatization is the best way to manage our social security system. Privatization is the best way to manage our social security system.

Week 1 Discussion 1

“Make It Real.” Please respond to the following:

Choose and describe two (2) “real-world” best practices a budget analyst should strive to apply.

Choose and describe two (2) worst practices a budget analyst should avoid.

State whether you think the choices of best and worst practices depend on the level of government in which the budget analyst serves. Justify your answer.

Week 1 Discussion 2

“Debate It!—Privatization.” Please respond to the following:

Take a position on the topic, articulate it clearly, support it, and defend it during the debate.

Privatization is the best way to manage our social security system.

Privatization is the best way to manage our social security system.