Finance Midterm

Which of the following statements about the corporate form of business organization is true?The corporate form has the disadvantage of double taxation relative to a sole proprietorship.The corporate form is preferred over the sole proprietorship because a corporation is easier to form and faces less regulation.Sole proprietorships are the most common form of business organization because liability is limited to the amount invested in the business by the sole proprietor.The corporate form has the advantage of unlimited liability. The corporate form has the disadvantage of double taxation relative to a sole proprietorship.
The goal of the firm should be:maximization of profits (net income per share). maximization of shareholder wealth. maximization of market share. maximization of sales. maximization of shareholder wealth.
Which of the following statements are true regarding “Agency Problem”?Managers might attempt to benefit themselves in terms of salary and perquisites at the expense of shareholders.The agency problem results from the separation of management and the ownership of the firm.The agency problem may interfere with the implementation of maximizing shareholder wealth.all of these all of these
Capital structure decisions include all of the following EXCEPT:Deciding how to pay for long term projects. Deciding the mix of debt and equity for the firm. Deciding the total amount of debt the firm should take on. Deciding what assets to purchase. Deciding what assets to purchase.
Short-term assets and short-term liabilities are referred to as the firm’s:cash flow. capital budget. capital structure. working capital. financing mix. working capital.
Anyone other than the firm’s stockholders or creditors that might have a claim on the cash flows of a firm is called a:residual owner. shareholder. liaison. provisional partner. stakeholder. stakeholder.
Capital budgeting is the process of:deciding the amount of earnings that a firm should retain. choosing how much cash to keep on hand. determining how to raise the money required to fund a project. planning and managing a firm’s long-term investments. planning and managing a firm’s long-term investments.
The shareholders of common stock of a corporation:are protected from any financial losses. are personally liable for a percentage of the firm’s debts.share equally in any losses created by the firm. are protected from any losses exceeding their equity investment in the firm. receive tax-free income because profits are taxed at the corporate level. are protected from any losses exceeding their equity investment in the firm.
At what rate must $900 be compounded annually for it to grow to $1800 in 5 years?9.97 percent 14.87 percent 12.04 percent 13.98 percent 14.87 percent
What is the present value of $10000 to be received 10 years from today? Assume a discount rate of 6% compounded annually and round to the nearest $10.$5,500 $6,890 $5,470 $5,580 $5,580
If Al deposits $1200 into a bank account today that pays 5% interest compounded quarterly, what will the account balance be in 6 years?1,614 1,625 1,617 1,598 1,617
The interest rate used to calculate the present value of future cash flows is called the:compound interest rate. present value factor. future value factor. current yield rate. discount rate. discount rate.
You want to have $65000 for your daughter’s education 18 years from now. If you can earn 3 percent, compounded annually, on your savings, how much do you need to deposit today to reach your goal?$38,180.65 $29,037.98 $12,879.76 $39,464.11 $40,000.87 $38,180.65
All else equal, the higher the interest rate, the higher the present value of an amount to be received at some point in the future.True False False
You have $83000 saved today and want to purchase a new yacht when your money grows to $325000. If you can earn 9 percent on your investments, how long do you have to wait to buy your yacht?15.29 years 15.17 years 15.01 years 15.84 years 15.66 years 15.84 years

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