School of Business
TUTORIAL 4:
CHAPTER 8:
QUESTIONS
Q2.
If the returns for a security were known with certainty, what shape would the
probability distribution of returns graph have?
The probability distribution of a security whose returns are known with c
School of Business
TUTORIAL 1:
CHAPTER 1:
QUESTIONS
Q2.
What are the differences between shareholder wealth maximisation and profit
maximisation? If a firm chooses to pursue the objective of shareholder wealth
maximisation, does this preclude the use of p
School of Business
TUTORIAL 9:
CHAPTER 10:
QUESTIONS
Q1.
How does the net present value model complement the objective of maximising
shareholder wealth?
The net present value method computes the present worth of a projects benefits over its
costs, evalua
School of Business
TUTORIAL 7:
CHAPTER 7:
QUESTIONS
Q4.
Explain the differences between par value, book value, and market value per share of
common stock.
For common stock, par value typically is a low figure of little significance. Book value
is common s
School of Business
TUTORIAL 6:
CHAPTER 6:
QUESTIONS
Q3.
Suppose a company simultaneously sold two long-term debt issues at par: 9 1/8 percent
senior debentures and 9 3/8 percent subordinated debentures. What risk-return tradeoff would be faced by an inves
School of Business
TUTORIAL 8:
CHAPTER 9:
QUESTIONS
Q2.
What is a mutually exclusive project? An independent project? A contingent project?
Given an example of each.
Mutually exclusive project the acceptance of one precludes the acceptance of another,
e.g
School of Business
TUTORIAL 5:
CHAPTER 8:
QUESTIONS
Q8.
Distinguish between unsystematic and systematic risk. Under what circumstances are
investors likely to ignore the unsystematic risk characteristics of a security?
Systematic risk refers to that porti
SchoolofBusiness
TUTORIAL 10:
CHAPTER 12:
QUESTIONS
Q1.
How do retained earnings differ from other sources of financing?
Retained earnings are an internally generated source of financing, whereas other
sources of financing are external (long-term debt, pr
School of Business
TUTORIAL 3:
CHAPTER 5:
QUESTIONS
Q3.
What happens to the present value of an annuity as the interest rate increases? What
happens to the future value of an annuity as the interest rate increases?
As the interest rate increases, any annu
School of Business
TUTORIAL 2:
CHAPTER 5:
QUESTIONS
Q4.
Which would you prefer to invest in: a savings account paying 6 percent compounded
annually or a savings account paying 6 percent compounded daily? Why?
Daily compounding is preferred because you wil