1. What is an IPO? Does this offering occur in the Primary market or the Secondary market?
   1. Which of the following statements are true, which are false and why?
      1. In an IPO there is one seller and many buyers
      2. The IPO market is a trading market
      3. The corporation makes money on all sales of stock in the secondary market.
      4. A public company will issue additional shares in the primary market in order to raise funding for expansion

2. Which of the following statements is correct? Which statements are false? Explain.
   1. If a company assigns the same cost of capital to all of its projects regardless of each projects risk, then the company is likely to reject some safe projects that it actually should accept and likely to accept some risky projects it should reject.
   2. Because of the risk of bankruptcy, the cost of debt is always higher than the cost of equity.
   3. Since debt capital is riskier than equity capital, the after-tax cost of debt is always greater than the WACC.

3. Do you agree or disagree with the following statements? Explain.
   1. The best forecast of future returns on the stock market is the average over the past ten years of historical returns
   2. Because stocks offer a higher return over the long term than bonds, all rational investors should prefer stocks.
   3. Because a government bond is considered risk-free, that means an investor would never suffer a loss.

4. Which one of the following statements is NOT an advantage of going public?
   1. It allows a firms founders to diversify their holdings
   2. It increases the liquidity of the stock
   3. It establishes a value for the firm
   4. It increases the transparency of financial information
   5. It makes it easier to raise new equity capital in the future

Discuss fully the reasons for your choice.

5. Describe the concept of beta in the financial markets. Is it better for a company to have a high beta or a low beta? Justify your answer and give an example.

6. Working capital management involves the financing and management of corporate assets of the firm.
   1. Circle the assets which are included in the definition of working capital
      1. Fixed assets
      2. Current assets
      3. Total assets
      4. Plant & Equipment
      5. Inventory
      6. Cash, accounts receivable & Inventory

7. Which of the following is a computerized exchange rather than a location? Describe each of the four items listed below
   1. The NYSE
   2. The American Stock Exchange
   3. The DOW
   4. Nasdaq

8. Define the purpose of these three key financial statements and answer the questions related to these statements:
   1. Income statement
      1. Are common dividends paid out of a corporations pretax or after tax earnings?
      2. What happens to the portion of net income not paid out in dividends?
   2. Balance Sheet
      1. What are the three components of the balance sheet?
   3. Cash Flow Statement
      1. There are three key activities of a corporation shown on the cash flow statement: operating activities, investing activities & financing activities. Which one in your opinion is key to the long-term viability of the firm?

9. Each capital source for an organization may have a different capital cost.
   1. True
   2. False

10. A technology company start-up in the growth and development stages is unlikely to institute a policy for paying dividends. Explain

11. If the WACC(Weighted Average Cost of Capital) is greater than the NPV, should a project should be rejected? Why or Why not?

12. Poison pills usually create a rights offering which dilutes share value and increases the number of shares outstanding. What is the purpose of a poison pill?

13. An organization in the maturity stage of operations is more likely to have in place a consistent and upward moving dividend policy. True or False?