Quiz_3_Answers - Quiz #3 Group 1 1. Capital budgeting...

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Quiz #3   Group 1 1. Capital budgeting decisions focus on which area of a company’s balance sheet? A. Long-term liabilities B. Short-term liabilities C. Long-term assets D. Stockholders’ equity E. Short-term assets Answer:  C   Group 1 2. Capital budgeting decisions focus on which area of a company’s balance sheet? A. Stockholders’ equity B. Long-term assets C. Short-term assets D. Short-term liabilities E. Long-term liabilities Answer:  B   Group 2 3. A general rule used by companies in determining whether or not to make an investment is: A. Invest when expected return on investment is  greater than cost of capital. B. Invest when there is a positive expected return  on investment.
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C. Invest when cost of capital is greater than  return on investment. D. Invest when net present value of cash flows is  negative. E. Invest only when cost of capital is equal to  expected return on investment. Answer:  A   Group 3 4. Generally, what happens to a company’s stock price when it announces its investment plans? A. Stock price increases. B. Stock price decreases. C. Stock prices are not affected at all by  announced investment plans. D. Stock price remains the same. E. Stock price decreases initially, but then  increases shortly thereafter. Answer:  A   Group 4 5. Which of the following is a real-world example of a good capital budgeting investment? A. GM’s investment in the company’s  infrastructure in the 1980s B. RJR Nabisco’s investment in smokeless  cigarettes C. Disney’s investment in EuroDisney D. Disney’s investment in The Lion King E. Motorola’s investment in the Iridium Project Answer:  D
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Which of the following is a real-world example of a bad capital budgeting investment? A. Boeing’s investment in the 777. B. Microsoft’s investment in Windows 2000. C. The Alaskan Pipeline D. Motorola’s investment in the Iridium Project E. Disney’s investment in The Lion King Answer:  D   Group 5 7. Capital Structure is: A. The mix of common stock and preferred stock a  company issues. B. The mix of assets and liabilities a company has  on its balance sheet C. The mix of tangible and intangible assets a  company has on its balance sheet D. The mix of only long-term debt and short-term  debt a company uses to finance its business E. The mix of debt and equity a company uses to  finance its business Answer:  E 8. Capital structure decisions focus on what area of a company’s balance sheet? A.
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This note was uploaded on 05/17/2008 for the course B A 301 taught by Professor Gray,garyjosephwoolridge,joseph during the Spring '07 term at Pennsylvania State University, University Park.

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Quiz_3_Answers - Quiz #3 Group 1 1. Capital budgeting...

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