1.When the corporate tax structure features multiple tax brackets each with different tax rates, which of the following should a financial manager use in deciding whether to undertake a corporate spending project?

Multiple Choice

• Average tax rate

• Marginal tax rate

• When there are multiple tax brackets with different tax rates, average and marginal tax rates will always be the same.

2. Which of the following BEST describes a company's proper liquidity management?

Multiple Choice

• Liquitity management is a balancing act; managers try to find liquidity levels that are neither too high not too low.

• A Financial Manager will try to keep as much cash on the books as possible to maximize short-term earnings.

• A company should never keep cash in its account because bond coupon payments can be deferred for up to a year without penalty.

• Liquidity levels that are too low will never cause a firm to go bankrupt.

3.

Which of the following is FALSE regarding Book Value (in relation to Market Value)?

Multiple Choice

• The Book Value of an asset is what appears on the books of the company.

• Book Value of an asset equals historical cost minus any Depreciation that has been taken for that asset.

• Book Value is a much more certain quantity than Market Value.

• Book Value is a much better measure of what an asset is currently worth than Market Value.