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Finance Week 9 Quiz MCQs

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Question;Question 1The cost of capital is a combination of a firm's payments to the different sources of capital funding. We call this a. the average cost of capital. b. the weighted average cost of capital. c. the transfer price. d. the discount rate.1 points Question 2The cost of capital for a firm is a. the price of productive inputs that the firm pays. b. the interest rate on borrowed funds and returns for equity. c. is a sunk cost. d. determined by profits.1 points Question 3Stocks are a a. form of debt. b. form of debt and equity. c. form of equity. d. just a way for firms to borrow money.1 points Question 4Bonds generally a. have lower value on secondary markets. b. have more risk than stock. c. have less risk than stock. d. pay a fixed proportion of profits.1 points Question 5The price of a bond and the market interest rate (the discount rate) a. are inversely related b. are directly related. c. are linked by the capital asset pricing model. d. are positively related.1 points Question 6Capital structure refers to a. the ratio of equity to debt. b. the ratio of common stock to preferred stock. c. the ratio of cash to current liabilities d. the ratio of debt to equity.1 points Question 7The cost of equity capital to a firm is equal to a. a risk-free interest rate. b. the Treasury bill rate minus an equity premium. c. the dividend payments. d. a risk-free rate plus an equity premium.1 points Question 8You should invest in a new project if a. the present value of all costs is negative. b. the NPV is positive. c. the expected revenues are positive. d. none of these choices.1 points Question 9If the discount rate increases a. investment also increases. b. NPV does not change. c. NPV falls. d. NPV rises.1 points Question 10NPV calculation needs to include a. only variable costs of a project. b. all costs related to a project. c. only sunk costs of a project. d. a risk-free rate as the discount rate.1 points Question 11The corporate form of business allows owners a more efficient way to manage risk relative to a. proprietorships. b. partnerships. c. other non-corporate forms of business. d. all of these choices.1 points Question 12Stockholders manage risk by a. electing the board of directors. b. having lots of bonds in their portfolios. c. appointing day-to-day managers. d. diversifying their portfolios.1 points Question 13The market process can be thought of as a. a path to discovery of information. b. an inflexible process. c. a theoretical concept that reveals little useful information. d. none of these choices.1 points Question 14In general, the structure of a business firm a. seems more like a central planning agency than a market. b. looks like a flat network. c. is largely determined by legal considerations. d. looks like a market.1 points Question 15Internal markets a. are used to determine a transfer price between different units and activity centers. b. are most commonly relegated to cafeteria services and vending. c. are part of a firm's horizontal network. d. none of these choices.1 points Question 16Transfer prices should be set to so a. to maximize profits for only one unit in a multi-unit firm. b. allow arbitrage with the external market place. c. to maximize profits for the overall firm. d. none of these choices.1 points Question 17BP has a. only used external markets. b. used internal markets successfully to reduce emissions. c. used internal markets to replace vendor relationships. d. none of these choices.1 points Question 18Market prices a. are limited in their information content. b. contain all available information. c. contain only past information. d. none of these choices.1 points Question 19Firms have started to use ____ to solicit information about possible events that are important to them a. internal markets b. external networks c. prediction markets d. none of these choices.1 points Question 20Internal markets a. are subject to the same problems as external markets. b. do not have the same problems as external markets. c. are more useful relative to external markets. d. have externalities but but in context are called internalities.

 

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