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Practice+final+questions - Practice Questions for MGMT 109...

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1 Practice Questions for MGMT 109 Final. These are practice questions. Don't take any focus or lack thereof as an indication of the material covered in the final. 1. You purchase a machine for $20,000, depreciated straight-line to a book value of 5,000 over its five year life. If the machine is sold at the end of the third year for $10,000, what is the after tax salvage value, assuming your tax rate is 34%? ______________________________ 2. Which of the following is NOT correct? a) Unsystematic risk is essentially eliminated by diversification b) Both systematic and unsystematic risk matter to a well-diversified investor c) The amount of systematic risk in an asset relative to the market is measured by beta d) Spreading an investment across a number of assets will eliminate part of the total risk e) On average, standard deviation of a portfolio declines as the number of assets in the portfolio is increased, but there is a limit below which the standard deviation will not fall 3. Which of the following is true about trying to estimate a firm's cost of equity capital? 4. Which of the following is NOT true regarding a firm's cost of debt?
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