financialmanagementmidterm2010 - The answers are...

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The answers are highlighted in yellow Which of the following statements is correct? (Points: 10) One way to increase EVA is to achieve the same level of operating income but with more investor- supplied capital. If a firm reports positive net income, its EVA must also be positive One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free. One way to increase EVA is to generate the same level of operating income but with less investor- supplied capital. Actions that increase reported net income will always increase net cash flow. 2. (TCO D) Assume that the current coporate bond yield curve is upward sloping. Under this condition, then we could be sure that. .. (Points: 10) Inflation is expected to decline in the future. The economy is not in a recession Long-term bonds are a better buy than short-term bonds Maturity risk premiums could help to explain the yield curve's upward slope Long-term interest rates are more volatile than short-term rates. 3. (TCO B) Which one of the following is most correct? (Points: 10) a. An investment which conmpounds interest semiannually, and has a nominal rate of 10 percent will have an effective rate less than 10 percent.
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This note was uploaded on 03/28/2010 for the course FINANCE 100 taught by Professor Finance during the Spring '10 term at Keller Graduate School of Management.

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financialmanagementmidterm2010 - The answers are...

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