midterm1_practice

midterm1_practice - Midterm 1 Practice Problems True/False...

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Midterm 1, Practice Problems 1 out of 6 True/False 1. Book value of shareholders’ equity can sometimes be negative. True False 2. Earnings management is when managers use their discretion to make accounting choices that depict the true financial condition of the firm. True False 3. Cash flow to shareholders must be less than or equal to net income. True False 4. Retained Earnings refers to how much cash the firm is keeping on hand. True False 5. One assumption/constraint in deriving the Sustainable Growth Rate is that the firm cannot issue any equity. True False 6. Starting today (at time t = 0), you will make annual $10 deposits into your savings account. If your bank offers you an effective annual rate of 5%, then how much money will you have in your account at time t = 30? Final Answer:
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Midterm 1, Practice Problems 2 out of 6 7. You just received $500 from your friend today. You will not be receiving any additional money next year. Your bank pays you 5% annually on your savings deposits, and will lend you money at a rate of 10% annually. You would like to maximize your spending such that you spend the exact same amount, X, at both time t = 0 and t = 1. What is X?
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midterm1_practice - Midterm 1 Practice Problems True/False...

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