Pick the correct answer don't explain

1.What is the fundamental goal of a firm?

Profit maximization

Maximizing shareholder wealth

Maximizing management wealth

Corporate social responsibility

2.What problem arises as a result of the separation of ownership and management of a firm?

Advocacy problem

Agency problem

Self-interest problem

Subordination problem

3.Which of the following are acceptable criteria for determining the weights in the weighted average cost of capital?

Market value of the capital structure and historical costs of financing

Market value of the capital structure and the target mix of debt and equity

Using the after-tax cost of debt and the market value of the capital structure

Using the book value of the capital structure and the prior level of debt and equity

4.When a company increases its degree of financial leverage,

the equity beta of the company falls

the systematic risk of the company falls

the unsystematic risk of the company falls

the standard deviation of returns on the equity of the company rises

5.Calculate the degree of financial leverage for a firm with EBIT of $6,000,000, fixed cost of $3,000,000, interest expense of $1,000,000, preferred stock dividends of 800,000, and a 40 percent tax rate

6.00

9.00

1.43

1.20

6.What is the current price of a share of stock when the last dividend was $3.00, the growth rate is 6 percent, and the investor's required rate of return is 12 percent?

$25.00

$26.50

$50.00

$53.00

7.What is the current price of a share of stock when the current dividend is $4.75, the growth rate is 7 percent, and the investor's required rate of return is 11 percent?

$118.75

$43.16

$46.20

$127.06

8.The market value of Company T's equity is $15.0 million, and the market value of its risk-free debt is $5.0 million. If the required rate of return on the equity is 20.0% and on the debt is 8.0%, calculate the company's cost of capital. (Assume no taxes)

17.00%

20.00%

8.10%

9.30%

9.A firm is considering a project requiring an investment of $27,000. The project would generate an annual cash flow of $6,296 for the next seven years. The company uses the straight-line method of depreciation. The approximate internal rate of return for the project is

6.00%

8.00%

12.00%

14.00%

10.Individual R is considering two investments. Each will cost $20,000 initially. Project 1 will return annual cash flows of $10,000 in each of three years. Project 2 will return $5,000 in year 1, $10,000 in year 2, and $15,000 in year 3. Roman requires a minimum rate of return of 10%. What is the NPV of Project 1, Project 2,? Which project must be selected? (round off to the nearest tens).

$20,000; $20,220; Project 2

$25,670; $24,520; Project 2

$4,870; $4,080; Project 1

$22,530; $22,510; Project 1