Fin final exam questions with verified answers

the capital budgeting methods learned in this course can be used to analyze proposed changes to the firm's: a. physical assets b. accounting methods c. both a and b - Answers-c. both a and b what is the effect on a firm's cost of equity (rs) if the Fed tightens credit, assuming other things are held constant? a. increase b. decrease c. no effect d. indeterminate - Answers-a. increase example of a firm with diversified risk through its choice of product lines: - Answers-Head when computing structure weights for WACC, the ___ value of equity should be used a. market b. book - Answers-a. market according to the text, is the control issue associated with preemptive rights likely to be more of importance to stockholders of publicly owned or closely held (private) firms? a. publicly owned b. closely held - Answers-b. closely held in capital budgeting, interest expense should be deducted from estimated project cash flows, because it will not occur unless the project is accepted. a. true b. false - Answers-b. false The project selection method most consistent with the goal of firm value maximization is: a. payback method b. MIRR c. IRR d. NPV - Answers-d. NPV the corporate valuation model cannot be used to value a company unless the company pays dividends a. true b. false - Answers-a. true