class test 2 - #18: /10 #19: /12 Total: /22 VERSION 1 MIME...

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VERSION 1 M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y Class Test #2 – Friday, 27 March, 2009 – 90 minutes PRINT your family name / initial and record your student ID number in the spaces provided below. FAMILY NAME / INITIAL STUDENT ID # S O L U T I O N S This test consists of 17 multiple-choice questions, and two problems requiring full solutions. The multiple-choice questions are worth a total of 78 points. There are no penal- ties for incorrect answers. The problems are worth a total of 22 points. Number of pages with questions: 7 WARNING: The Examination Security Monitor Program detects pairs of students with unusually similar answer patterns on multiple-choice exams. Data generated by this program can be used as admissible evidence, either to initiate or corroborate an investigation or a charge of cheating under Section 16 of the Code of Student Conduct and Disciplinary Procedures. #18: /10 #19: /12 Total:
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VERSION 1 1 MULTIPLE-CHOICE QUESTIONS Circle the correct answers on this test paper and record them on the computer answer sheet. Multiple-choice Statements – Circle the correct answer on this test paper and record it on the computer answer sheet. (2 points each for a total of 12) Note : There are no penalties for incorrect answers. 1. Which one of the following statements characterises mutually exclusive investment alterna- tives? A) They can only be accepted if capital funds are limited. B) The selection of one alternative excludes the selection of all other alternatives. C) The selection of one alternative is not affected by either the selection or rejection of another alternative. D) The present value ratio should be used to rank the projects. E) The firm can decide to proceed with as many projects as possible. 2. In which one of the following situations will a firm in a perfectly competitive market earn profits? A) Marginal revenue > average variable costs B) Marginal revenue > average cost C) Average cost > marginal cost D) Average cost > average revenue E) Average revenue > average variable cost 3. Which one of the statements listed below is correct? A) Preferred shares allow the expansion of a company’s equity base without diluting the voting power of the bondholders. B) The objective of business firms that attempt to maintain a pre-determined capital structure in the long run is to maximise their weighted-average cost of capital. C) The maturity date on a bond specifies the time at which the interest becomes pay- able. D) Financial leverage refers to the ability of a firm to increase its return on equity by in- cluding long-term debt in its capital structure. E) The periodical interest payment paid by a bond is called its yield-to-maturity. 4.
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class test 2 - #18: /10 #19: /12 Total: /22 VERSION 1 MIME...

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