1) Considered alone, which of the following would DECREASE a company's current ratio?

A. An increase in net fixed assets

B. An increase in accounts payable

C. An increase in long-term debt

D. An increase in retained earnings

2) Companies E and G each reported the same earnings per share (EPS, but Company E's stock trades at a higher price). Which of the following statements is CORRECT?

A. Company E trades at a lower P/E ratio

B. Company E must pay a lower dividend

C. Company E is probably judged by investors to be riskier

D. Company E must have a higher market-to-book ratio

E. Company E probably has more growth opportunity

3) Goldberg Inc. has always paid out all of its earnings as dividends, and this same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity, its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would INCREASE its WACC?

A. The flotation costs associated with issuing new common stock decrease

B. The company's beta decreases

C. Expected inflation remains constant

D. Bankruptcy cost increases

4) If inflation increases, the cost of capital will...

A. Increase

B. Decrease

C. Have higher risk

D. Not change