First Exam Answer

First Exam Answer - FIN350-F Quiz 1 First Name_ Last Name_...

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FIN350-F Quiz 1 First Name_______ Last Name_______ Version A EFF= = ( + ) PV C 1 i n = iper inomm When using calculator, sometimes you might need to enter a negative number to get the answer. When there are several cash flows within a year, apply periodic rate. For HP calculator, after doing an operation to convert nominal rate to EFF, you might need to change to setting of P/YR back to 1. NOPAT = EBIT (1 – Tax rate) NOWC = Current assets - Non-interest bearing current liability Notes payable or short-term debt is not a non-interest bearing current liability. Total Operating capital = NOWC + Net Fixed Assets OCF = NOPAT + Depreciation expense FCF(free cash flow) = NOPAT – change in total operating capital 1. Which of the following statements is true regarding the corporate form of organization compared to that of the sole proprietorship? A) The owners of the sole proprietorship have limited liability for the firm's debts. B) The sole proprietorship is the simplest business form to start-up. C) The corporation has a limited life. D) Dividends received by the corporation's shareholders are tax-exempt. E) It is more difficult to transfer ownership in a corporation 2. Which of the following would be considered a capital budgeting decision? A) Planning to issue preferred stocks rather than issuing common stocks B) A decision to expand into a new line of products, at a cost of $3 million C) Repurchasing shares of common stock D) Issuing debt in the form of long-term bonds 3. Because management goals may conflict with shareholder goals, __________ are said to exist. The possibility of _____ may impose some pressure on managers to work hard. A. Synergies; excessive perks B. Agency problems ; takeover by another company C. Growth opportunities; golden parachute D. Leverage problems; entrenchment 1
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4. One agency problem in a corporation is that shareholders may prefer to take ______ projects that may hurt bondholders. A.
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This note was uploaded on 09/20/2011 for the course FIN 350 taught by Professor Chen during the Spring '07 term at S.F. State.

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First Exam Answer - FIN350-F Quiz 1 First Name_ Last Name_...

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