Solved by verified expert :11)
Managers should not be concerned with business ethics because ethical behavior
is inconsistent with the primary goal of maximizing shareholder value.
12)
One of the problems associated with maximization of total current stock value
is that it ignores the timing of a project’s return.
13)
The risk-return tradeoff is seen in many areas of finance.
14)
The risk/return tradeoff implies that the return on a riskless asset must be
zero.
15)
The sole proprietorship has no legal business structure separate from its
owner.
16)
An efficient market is one where the prices of the assets traded in that market
fully reflect all available information at any instant in time.
17)
The opportunity cost of any choice you make is the highest-valued alternative
that you had to give up when you made the choice.
18)
The five basic principles of finance include all of the following except:
A)
Cash flow is what matters.
B)
Money has a time value.
C)
Risk requires a reward.
D)
Incremental profits determine value.
19) Suppose XYZ Corporation is
traded on the New York Stock Exchange.
XYZ’s closing price on Monday is $20 per share. After the market closes on Monday, XYZ makes
a surprise announcement that it has obtained a major new customer. XYZ’s stock will likely
A)
open at $20 per share on Tuesday and then increase as more investors read the
announcement in the Wall Street Journal.
B)
remain at $20 per share because in efficient markets the price already reflects
all information.
C)
open above $20 because the positive news will result in a higher valuation even
though the stock has not yet traded.
D)
open below $20 because the surprise announcement creates more uncertainty.
20)
A corporate manager decides to build a new store on a lot owned by the
corporation that could be sold to a local developer for $250,000. The lot was
purchased for $50,000 twenty years ago. When determining the value of the new
store project,
A)
the cost of the lot is zero since the corporation already owns it.
B)
the opportunity cost of the lot is $250,000 and should be included in
calculating the value of the project.
C)
the cost of the lot for valuation purposes is $50,000 because land does not
depreciate.
D)
the incremental cash flow should be the $50,000 original cost less accumulated
amortization.
