Correct answers will be marked most helpful

Question 2-40

A major difference between finance and accounting is finance takes into account the time value of money.

True

False

Question 3-41

Agency problems arise when the principals and agents have different attitudes and preferences toward risk.

True

False

Question4- 42

Generally speaking, the higher the risk the higher the required return.

True

False

Question5- 43

The two broad categories of capital are debt and dividends.

True

False

Question 1-36

Your assistant has just given you some data on a potential option of working cooperatively with another company rather than purchasing the $200,000 new equipment. The details of this option are: initial investment $120,000, operating cash flows years 1-3 of $47,000, 49,000, 52,000 respectively.NOTE these OCF numbers already take into account depreciation effect and terminal cash flow for this cooperative agreement so there is no need to calculate further. Cost of capital for this project is 7.5%.

Using just the financial analysis with a mutually exclusive outlook should they choose to purchase the new equipment or work cooperatively with another company?

work with other company

purchase new equipment

do neither

do both