Finance Final

3 - Q32 A garage is installing a new "bubble-wash" car wash. It will promote the car wash as a fun activity for the family, and it is expected that the novelty of this approach will boost sales in the medium term. If the cost of capital is 10%, what is the net present value (NPV) of this project? A) $150,548 B) $165,603 C) -$143,021 D) -$135,493

A) $150,548

3 - Q37 A bakery invests $40,000 in a light delivery truck. This was depreciated using the 5 year MACRS schedule shown above. If the company sold it immediately after the end of year 2 for $21,000, what should be the after-tax cash flow from the sale of this asset, given a tax rate of 40%? A) $17,208 B) $11,520 C) $3792 D) $9480

A) $17,208

3 - Q35 A firm is considering a new project that will generate cash revenue of $1,300,000 and cash expenses of $700,000 per year for five years. The equipment necessary for the project will cost $300,000 and will be depreciated straight line over four years. What is the expected free cash flow in the second year of the project if the firm's marginal tax rate is 35%? A) $416,250 B) $374,625 C) $341,250 D) $499,500

A) $416,250

3 - Q31 The balance sheet for a small firm is shown above. All amounts are in thousands of dollars. What is this firm's Net Working Capital? A) $46 thousand B) $86 thousand C) $126 thousand D) $7 thousand

A) $46 thousand

3 - Q58 Assume Ford Motors expects a new hybrid-engine project to produce incremental cash flows of $50 million each year, and expects these to grow at 4% each year. The upfront project costs are $420 million and Ford's weighted average cost of capital is 9%. If the issuance costs for external finances are $20 million, what is the NPV of the project? A) $560 million B) $616 million C) $588 million D) $504 million

A) $560 million

3 - Q46 Assume Lavender Corporation has a market value of $4 billion of equity and a market value of $19.8 billion of debt. What are the weights in equity and debt that are used for calculating the WACC? A) 0.168, 0.832 B) 0.832, 0.168 C) 0.10, 0.90 D) 0.90, 0.10

A) 0.168, 0.832

3 - Q54 Assume the market value of Fords' equity, preferred stock, and debt are $6 billion, $3 billion, and $13 billion, respectively. Ford has a beta of 1.7, the market risk premium is 8%, and the risk-free rate of interest is 3%. Ford's preferred stock pays a dividend of $2.50 each year and trades at a price of $30 per share. Ford's debt trades with a yield to maturity of 9.5%. What is Ford's weighted average cost of capital if its tax rate is 35%? A) 9.31% B) 11.18% C) 10.24% D) 9.78%

A) 9.31%

3 - Q52 SIROM Scientific Solutions has $12 million of outstanding equity and $4 million of bank debt. The bank debt costs 4% per year. The estimated equity beta is 1. If the market risk premium is 8% and the risk-free rate is 4%, compute the weighted average cost of capital if the firm's tax rate is 30% A) 9.70% B) 8.73% C) 10.67% D) 9.22%

A) 9.70%

3 - Q42 Jim owns a farm that he wants to sell. He learns that a highway will be built near the farm in the future, giving access to the farmland from a nearby city and thus making the land attractive to housing developers. Expecting the net present value (NPV) of the sale to be greater after the highway is build, he decided not to sell at this time. What real option is Jim taking? A) Option to delay B) Option to expand C) Option to abandon D) Option to switch

A) Option to delay

3 - Q30 Which of the following adjustments should NOT be made when computing free cash flow from incremental earnings? A) Subtracting depreciation expenses from taxable earnings B) Adding all non-cash expenses C) Adding depreciation D) Subtracting increases in Net Working Capital

A) Subtracting depreciation expenses from taxable earnings

1 - Q35 Which of the following statements regarding growing perpetuities is FALSE? A) We assume that r<g for a growing perpetuity B) A growing perpetuity is a cash flow stream that occurs at regular intervals and grows at a constant rate forever C) PV of a growing perpetuity = C/r-g D) To find the value of growing perpetuity one cash flow at a time would take forever

A) We assume that r<g for a growing perpetuity

1 - Q24 Which of the following statements is INCORRECT based on the time value of money? A) We refer to (1-r) as the interest rate factor for risk-free cash flows B) For most financial decisions, costs and benefits occur at different points in time C) In general, money today is worth more than money in one year D) We define the risk-free interest rate (r) for a given period as the interest rate at which money can be borrowed or lent without risk over that period

A) We refer to (1-r) as the interest rate factor for risk-free cash flows

3 - Q53 The after-tax cost of debt _____ the before-tax cost of debt for a firm that has a positive marginal tax rate A) is always less than B) may be greater than or less than C) is always greater than D) is always equal to

A) is always less than

3 - Q50 Your estimate of the market risk premium is 7%. The risk-free rate of return is 4% and General Motors has a beta of 1.6. What is General Motors' cost of equity capital? A) 13.7% B) 16.0% C) 15.2% D) 14.4%

C) 15.2%

3 - Q33 The Sisyphean Company is considering a new project that will have an annual depreciation expense of $3.6 million. If Sisyphean's marginal corporate tax rate is 35% and its average corporate tax rate is 30%, then what is the value of the depreciation tax shield on the company's new project? A) $1,080,000 B) $1,260,000 C) $1,134,000 D) $1,890,000

B) $1,260,000

2 - Q46 The Busby Corporation had a share price at the start of the year of $26.10, paid a dividend of $0.59 at the end of the year, and had a share price of $29.50 at the end of the year. Which of the following is closest to the rate of return of investments in companies with equal risk to The Busby Corporation for this period? A) 12% B) 13% C) 15% D) 14%

C) 15%

3 - Q38 A firm is considering the purchase of a new machine for $325,000. The firm is unsure if it should use the 3 Year MACRS schedule or straight-line depreciation over three years. What is the difference in the book value after three years if the firm uses MACRS instead of straight-line depreciation? A) $48,166 B) $0 C) $24,083 D) $300,918

B) $0

3 - Q22 Consider the following two projects: The profitability index for project B is closest to ____. A) 14.99 B) 0.09 C) 0.15 D) 22.49

C) 0.15

3 - Q39 Panjandrum Industries, a manufacturer of industrial piping is evaluating whether it should expand into the sale of plastic fittings for home garden sprinkler systems. It has made the above estimates of free cash flows resulting from such a decision (all quantities in millions of dollars). There are some concerns that estimates of manufacturing expenses may be low, due to the rising cost of raw materials. What is the difference in manufacturing expense for break-even point, if all other estimates are correct and the cost of capital is 9%? A) $1.99 million B) $1.66 million C) $2.32 million D) $1.83 million

B) $1.66 million

3 - Q34 A firm is considering changing their credit terms. It is estimated that this change would result in sales increasing by $1,600,000. This in turn would cause inventory to increase by $125,000, accounts receivable to increase by $100,000, and accounts payable to increase by $90,000. What is the firm's expected change in net working capital? A) $315,000 B) $135,000 C) $225,000 D) $1,735,000

B) $135,000

3 - Q59 Assume Ford Motors expects a new hybrid-engine project to produce incremental cash flows of $45 million each year, and expects these to grow at 3% each year. The upfront project costs are $380 million and Ford's weighted average cost of capital is 9%. If the issuance costs for external finances are $10 million, what is the NPV of the project? A) $396 million B) $360 million C) $324 million D) $378 million

B) $360 million

2 - Q57 SAP Inc. received a $1.5 million grant under its Small Business Innovation program. SAP invested the grant money and developed a system to remove metal contaminants from storm water in shipyards. The firm estimates that each shipyard spends $500,000 a year on storm water clean-up efforts. If SAP is able to sign up and retain four shipyards in the first year onwards, what is the PV of the project (net of investment) if the cost of capital for SAP is 14% per year? Assume a cost of operations and other costs fro SAP equal 50% of revenue. A) $4.80 million B) $5.64 million C) $4.51 million D) $5.93 million

B) $5.64 million

3 - Q43 A manufacturer of peripheral devices for PCs decides to try and capture some of the PC gaming market by creating gaming versions of its traditional peripheral devices. It decided to start with a gaming version of its standard keyboard, increasing the number of macro keys, adding a small LCD screen to display game data, and giving the user the ability to backlight keys in different colors. If this device is a success, the manufacturer plans to release gaming versions of its trackballs and other peripherals. What option is the manufacturer gaining by the release of the new keyboard? A) Option to delay B) Option to expand C) Option to abandon D) Option to switch

B) Option to expand

3 - Q3 A firm has an opportunity to invest $95,000 today that will yield $109,250 in one year. If interest rates are 4%, what is the net present value (NPV) of this investment? A) $16,077 B) $11,053 C) $10,048 D) $14,250

C) $10,048

1 - Q26 An investment will pay you $120 in one year and $200 in two years. If the interest rate is 4%, what is the present value of these cash flows? A) $320.00 B) $307.69 C) $300.29 D) $304.91

C) $300.29

3 - Q47 A firm incurs $70,000 in interest expenses each year. If the tax rate of the firm is 30%, what is the effective after-tax interest rate expense for the firm? A) $39,200.00 B) $34,300.00 C) $49,000.00 D) $56,350.00

C) $49,000.00

3 - Q60 Which of the following statements is FALSE? A) Issuance costs increase the WACC B) Issuance costs should be treated as cash outflows in NPV analysis C) External equity is less expensive than retained earnings D) A project that can be financed with internal funds will be less costly than the same project if it were financed with external funds

C) External equity is less expensive than retained earnings

3 - Q36 An insurance office owns a large building downtown. The sixth floor of this building currently houses its entire HR department. After carrying out a survey to see whether the sixth floor could be rented and for what price, the company must decide whether to split the HR department between currently unoccupied spaces on several floors and rent out the entire 6th floor or to leave things as they currently are. Which of the following should NOT be considered when deciding whether to rent out the sixth floor? A) The amount obtained by renting the sixth floor B) Cost involved with a loss of efficiency resulting from the HR department being split between several spaces C) The cost of the research into the feasibility of renting the 6th floor D) The cost of refurbishing the new space to be occupied by the HR department

C) The cost of the research into the feasibility of renting the 6th floor

2 - Q36 Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1,000 and a coupon rate of 7.5% (annual payments). The following table summarizes the YTM for the similar ten-year corporate bonds of various credit ratings: Assuming that Luther's bonds are rated AAA, their price will be closest to ____. A) $852 B) $1490 C) $1277 D) $1064

D) $1064

3 - Q45 The book value of a firm's equity is $100 million and its market value of equity is $200 million. The face value of its debt is $50 million and its market value of debt is $60 million. What is the market value of assets of the firm? A) $150 million B) $250 million C) $160 million D) $260 million

D) $260 million

3 - Q28 A small manufacturer that makes clothespins and other household products buys new injection molding equipment for a cost of $500,000. This will allow the manufacturer to make more clothespins in the same amount of time with an estimated increase in sales of 25%. If the manufacturer currently makes 75 tons of clothespins per year, which sell at $18,000 per ton, what will be the increase in revenue next year from the new equipment? A) $837,500 B) $303,750 C) $125,000 D) $337,500

D) $337,500

3 - Q49 Assume IBM just paid a dividend of $4.50 and expects these dividends to grow at 8% a year. The price of IBM is $100 per share. What is IBM's cost of equity capital? A) 8% B) 3.86% C) 12.22% D) 12.86%

D) 12.86%

3 - Q48 Assume JUP has debt with a book value of $24 million, trading at 120% of par value. The firm has book equity of $28 million, and 2 million shares trading at $20 per share. What weights should JUP use in calculating its WACC? A) 33.49% for debt, 66.51 for equity B) 29.30% for debt, 70.70% for equity C) 31.67% for debt, 62.33% for equity D) 41.86% for debt, 58.14% for equity

D) 41.86% for debt, 58.14% for equity

3 - Q55 Assume Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital. Its current capital structure has a 25% weight in equity, 10% in preferred stock, and 65% in debt. The cost of equity capital is 13%, the cost of preferred stock if 9% and the pretax cost of debt is 8%. What is the cost of weighted average cost of capital for Ford if its marginal tax rate is 40%? A) 8.36% B) 8.00% C) 6.91% D) 7.27%

D) 7.27%

3 - Q51 The outstanding debt of Berstin Corp. has ten years to maturity, a current yield of 7%, and a price of $95. What is the pretax cost of debt if the tax rate is 30%? A) 6.5% B) 4.9% C) 7.0% D) 7.37%

D) 7.37%

3 - Q44 Which of the following statements regarding real options is NOT correct? A) Real options should only be exercised when they increase the NPV of a project B) Real options give owners the right, but not the obligation, to exercise these opportunities at a later date C) Real options build greater flexibility into a project and thus increase its NPV D) Real options enhance the forecast of a project's expected future cash flows by incorporating, at the start of the project, the effect of decisions that will be made at a later date

D) Real options enhance the forecast of a project's expected future cash flows by incorporating, at the start of the project, the effect of decisions that will be made at a later date

3 - Q41 An analysis that breaks the net present value (NPV) calculation into its component assumptions and shows how the net present value (NPV) varies as one of the underlying assumptions changes in called ____. A) Scenario analysis B) Accounting break-even analysis C) Internal rate of return (IRR) analysis D) Sensitivity analysis

D) Sensitivity analysis

3- Q40 An exploration of the effect of changing multiple project parameters on net present value (NPV) is called A) Scenario analysis B) Accounting break-even analysis C) Internal rate of return (IRR) analysis D) Sensitivity analysis

D) Sensitivity analysis

3 - Q29 Which of the following would you NOT consider when making a capital budgeting decision? A) The opportunity to lease out a warehouse instead of using it to house a new production line B) The additional taxes a firm would have to pay in the next year C) The change in direct labor expense due to the purchase of a new machine D) The cost of marketing study completed last year

D) The cost of marketing study completed last year

3 - Q56 Holding everything else constant, an increase in cash _____ a firm's net debt. A) will have no impact on B) may increase or decrease C) will increase D) will decrease

D) will decrease

1 - Q36 Dan buys a property for $210,000. He is offered a 30-year loan by the bank, at an interest rate of 8% per year. What is the annual loan payment Dan must make? A) $18,653.76 B) $22,384.51 C) $26,115.26 D) $29,846.02

A) $18,653.76

2 - Q19 Two years ago you purchased a new SUV. You financed your SUV for 60 months (with payments made at the end of the month) with a loan at 5.95% APR. Your monthly payments are $386.19 and you have just made your 24th monthly payment on your SUV. The amount of your original loan is closest to _____. A) $20,000 B) $22,000 C) $24,000 D) $28,000

A) $20,000

1 - Q33 Clarissa wants to fund a growing perpetuity that will pay $10,000 per year to a local museum, starting next year. She wants the annual amount paid to the museum to grow by 5% per year. Given that the interest rate is 9%, how much does she need to fund this perpetuity? A) $250,000.00 B) $125,000.00 C) $200,000.00 D) $300,000.00

A) $250,000.00

2 - Q43 Sultan Services has 1.2 million shares outstanding. It expects earnings at the end of the year of $6.0 million. Sultan pays out 60% of its earnings in total: 40% paid out as dividends and 20% used to repurchase shares. If Sultan's earnings are expected to grow by 5% per year, the payout rates do not change, and Sultan's equity cost of capital is 10%, what is Sultan's share price? A) $60.00 B) $24.00 C) $36.00 D) $12.00

A) $60.00

3 - Q18 A company buys a color printer that will cost $16,000 to buy, and last 5 years. It is assumed that it will require servicing costing $500 each year. What is the equivalent annual annuity of this deal, given a cost of capital of 8%? A) -$4507 B) -$4057 C) -$3606 D) -$3155

A) -$4507

3 - Q5 Martin is offered an investment where for $6000 today, he will receive $6180 in one year. He decided to borrow $6000 from the bank to make this investment. What is the maximum interest rate the bank needs to offer on the loan if Martin is at least to break even on this investment? A) 3% B) 4% C) 2% D) 1%

A) 3%

2 - Q42 Luther Industries has a dividend yield of 4.5% and a cost of equity capital of 10%. Luther Industries' dividends are expected to grow at a constant rate indefinitely. The growth rate of Luther's dividends is closest to _____. A) 5.5% B) 5.0% C) 11.0% D) 14.5%

A) 5.5%

3 - Q4 Martin is offered an investment where for $4000 today, he will receive $4240 in one year. He decides to borrow $4000 from the bank to make this investment. What is the maximum interest rate the bank needs to offer on the loan if Martin is at least to break even on this investment? A) 6% B) 5% C) 7% D) 4%

A) 6%

2 - Q28 Which of the following bonds is trading at par? A) A bond with a $1,000 face value trading at $1,000 B) A bond with a $2,000 face value trading at $1,987 C) A bond with a $1,000 face value trading at $999 D) A bond with a $2,000 face value trading at $2,012

A) A bond with a $1,000 face value trading at $1,000

2 - Q26 If the yield to maturity of all of the following bonds if 6%, which will trade at the greatest premium per $100 face value? A) A bond with a $1,000 face value, five years to maturity and 6.3% annual coupon payments B) A bond with a $10,000 face value, four years to maturity and a 6.2% semiannual coupon payments C) A bond with a $5,000 face value, seven years to maturity and 5.5% annual coupon payments D) A bond with a $500 face value, seven years to maturity and 5.2% annual coupon payments

A) A bond with a $1,000 face value, five years to maturity and 6.3% annual coupon payments

3 - Q25 The ultimate goal of the capital budgeting process is to _____. A) Determine the effect of the decision to accept or reject a project on the firm's cash flows B) Determine how the consequences of making a particular decision affects the firm's revenues and costs forecast the consequences of a list of future projects for the firm C) Forecast the consequences of a list of future projects for the firm D) List the projects and investments that a company plans to undertake in the future

A) Determine the effect of the decision to accept or reject a project on the firm's cash flows

3 - Q10 According to Graham and Harvey's 2001 survey, the most popular decision rules for capital budgeting used by CFOs are _____. A) IRR, NPV, Payback period B) Profitability index, NPV, IRR C) NPV, IRR, MIRR D) MIRR, IRR, Payback period

A) IRR, NPV, Payback period

2 - Q21 Consider the following investment alternatives: Which alternative offers you the lowest effective rate of return? A) Investment A B) Investment B C) Investment C D) Investment D

A) Investment A

1 - Q27 Which of the following investments has a higher present value, assuming the same (strictly positive) interest rate applies to both investments? A) Investment Y has a higher present value B) Investment X has a higher present value C) Investment X and Investment Y have the same present value, since the total cash flows is the same for both D) No comparison can be made - we need to know the interest rate to calculate the present value

A) Investment Y has a higher present value

3 - Q11 Which of the following is NOT a limitation of the payback rule? A) It is difficult to calculate B) It does not consider the time value of money C) It does not consider cash flows occurring after the payback period D) Lacks a decision criterion that is economically based

A) It is difficult to calculate

1 - Q15 What is the main reason that it is necessary for public companies to follow the rules and format set out in the Generally Accepted Accounting Principles (GAAP) when creating financial statements? A) It makes it easier to compare the financial results of different firms B) It ensures that important budgetary information is not omitted C) It ensures that information on the performance of public companies is reported on cash-basis accounting D) It ensures that the market value of assets and debt are reported accurately

A) It makes it easier to compare the financial results of different firms

2 - Q23 Which of the following is/are TRUE? I. The EAR can never exceed the APR II. The APR can never exceed the EAR III. The APR and EAR can never be equal A) Only II. is true B) Only I. is true C) Only II. & III. is true D) Only I. and III. are true

A) Only II. is true

3 - Q24 Which of the following decision rules might best be used as a supplement to net present value (NPV) by a firm that favors liquidity? A) Payback period B) Profitability index C) MIRR D) Equivalent annual annuity

A) Payback period

1 - Q14 Which of the following is NOT a role of financial institutions? A) Printing money for borrowers B) Moving funds through time C) Spreading out risk-bearing D) Moving funds from savers to borrowers

A) Printing money for borrowers

1 - Q28 Which of the following is true about perpetuities? A) Since a perpetuity generates cash flows every period infinitely, the cash flow generated equals the PV times the interest rate B) Since a perpetuity generates cash flows every period infinitely, initial cash outflow must be discounted to calculate the present value C) Since a perpetuity generates cash flows every period infinitely, its FV is the same as its PV D) Since a perpetuity generates cash flows every period infinitely, there is no way to solve for the cash flow using the present value and the interest rate

A) Since a perpetuity generates cash flows every period infinitely, the cash flow generated equals the PV times the interest rate

1 - Q32 Which of the following statements regarding annuities is FASLE? A) The difference between an annuity and a perpetuity is that a perpetuity ends after some fixed number of payments B) An annuity is a stream of N equal cash flows paid at regular intervals C) Most car loans, mortgages, and some bonds are annuities D) PV of an annuity = C x 1/r (1-1/(1+r)^N)

A) The difference between an annuity and a perpetuity is that a perpetuity ends after some fixed number of payments

3 - Q19 A lawn maintenance company compares two ride-on-mowers-the Excelsior, which has an expected working-life of six years, and the Grassassinator, which has a working life of four years. After examining the equivalent annual annuities of each mower, the company decided to purchase the Excelsior. Which of the following, if true, would be most likely to make them change that decision? A) The mower is only expected to be needed for three years B) The number of customers requiring lawn-mowing services is expected to sharply increase in the near future C) Fuel prices are expected to rise and raise the annual running costs of all mowers D) The prices of equivalent mowers are expected to grow in the future as lawnmower manufacturers consolidate

A) The mower is only expected to be needed for three years

1 - Q4 What is the major way in which the roles and obligations of the owners of a limited liability company differ from the roles and obligations of limited partners in a limited partnership? A) The owners of a limited liability company can take an active role in running the company. B) The owners of a limited liability company have personal obligation for debts incurred by the company. C) The owners of a limited liability company can withdraw from the company without the company being dissolved. D) There is no separation between the company and its owners in a limited liability company.

A) The owners of a limited liability can take an active role in running the company.

1 - Q21 A lender lends $10,100, which is to be repaid in annual payments of $2070 for 6 years. Which of the following shows the timeline of the loan from the lender's perspective? A) Year 0 ($10,100), Year 1 ($2070), Year 2 ($2070), Year 3 ($2070), Year 4 ($2070), Year 5 ($2070), Year 6 ($2070) B) Year 1 ($0), Year 2 ($2070), Year 3 ($2070), Year 4 ($2070), Year 5 ($2070), Year 6 ($2070) C) Year 0 ($10,100), Year 1 ($2070), Year 2 ($4070), Year 3 ($6070), Year 4 ($8070), Year 5 ($10,070), Year 6 ($12,070) D) Year 1 ($10,100), Year 2 ($2070), Year 3 ($2070), Year 4 ($2070), Year 5 ($2070), Year 6 ($2070)

A) Year 0 ($10,100), Year 1 ($2070), Year 2 ($2070), Year 3 ($2070), Year 4 ($2070), Year 5 ($2070), Year 6 ($2070)

3 - Q6 Peter has a business opportunity that requires him to invest $10,000 today, and receive $12,000 in one year. He can either use $10,000 that he already has for this investment or borrow the money from his bank at an interest rate of 10%. However, the $10,000 he has right now is needed for urgent repairs to his home, repairs that will cost at least $15,000 if he delays them for a year. What is the best alternative for Peter out of the following choices? A) Yes, since he can borrow the $10,000 from a bank, repair his home, invest $10,000 in the business opportunity, which, since it has a NPV>0 will mean he will still come out ahead after repaying the loan B) Yes, since the net present value (NPV) of the investment is greater than zero he can invest the $10,000 in the business opportunity, and then next year use this money plus the benefit from this money to make the necessary home repairs C) Yes, since the net present value (NPV) of the investment, should he take it, is greater than the net present value (NPV) of the home repairs if he delays them for one year D) No, since the net present value (NPV) of the investment, should he take it, is less than the net present value (NPV) of the home repairs if he delays them for one year

A) Yes, since he can borrow the $10,000 from a bank, repair his home, invest $10,000 in the business opportunity, which, since it has a NPV>0 will mean he will still come out ahead after repaying the loan

2 - Q44 JRN Enterprises just announced that it plans to cut its dividend from $3.00 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow indefinitely at 4% per year and JRN's stock was trading at $25.50 per share. With the new expansion, JRN's dividends are expected to grow 8% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to ____. A) $25.50 B) $19.32 C) $38.63 D) $12.75

B) $19.32

1 - Q5 A C corporation earns $8.30 per share before taxes and the company pays a dividend of $4.00 per share. The corporate tax rate is 39%, the personal tax rate on dividends is 15%, and the personal tax rate on non-dividend income is 36%. What is the after-tax amount an individual would receive from the dividend? A) $4.76 B) $3.40 C) $2.72 D) $4.08

B) $3.40

1 - Q40 You are considering purchasing a new home. You will need to borrow $290,000 to purchase the home. A mortgage company offers you a 20-year fixed rate mortgage (240 months) at 12% APR (1% month). If you borrow the money from the mortgage company, your monthly mortgage payment will be closest to _______. A) $4470 B) $3193 C) $5109 D) $2554

B) $3193

1 - Q30 Since your first birthday, your grandparents have been depositing $1200 into a savings account on every one of your birthdays. The account pays 6% interest annually. Immediately after your grandparents make the deposit on your 18th birthday, the amount of money in your savings account will be closest to _____. A) $44,504.14 B) $37,086.78 C) $51,921.49 D) $22,252.07

B) $37,086.78

2 - Q47 Chittenden Enterprises has 643 million shares outstanding. It expects earnings at the end of the year to be $960 million. The firm's equity cost of capital is 9%. Chittenden pays out 30% of its earnings in total: 20% paid out as dividends and 10% used to repurchase shares. If Chittenden's earnings are expected to grow at a constant 3% per year, what is Chittenden's share price? A) $2.24 B) $7.47 C) $3.74 D) $14.94

B) $7.47

1 - Q19 You own 1000 shares of Newstar Financial stock, currently trading for $57 per share. You are offered a deal where you can exchange these stocks for 900 shares of Amback Financial Group stock, currently trading at $63 per share. What is the value of this trade, if you choose to make it? A) $300 B) -$300 C) -$340 D) -$320

B) -$300

1 - Q39 What is the internal rate of return (IRR) of an investment that requires an initial investment of $11,000 today and pays $15,400 in one year's time? A) 43% B) 40% C) 44$ D) 37%

B) 40%

2 - Q25 What is the yield to maturity of a one-year, risk-free, zero-coupon bond with a $10,000 face value and a price of $9400 when released? A) 6.000% B) 6.383% C) 0.009% D) 3.191%

B) 6.383%

2 - Q16 What is the real interest rate given a nominal rate of 8.9% and an inflation rate of 1.9%? A) 8.2% B) 6.9% C) 9.6% D) 11.0%

B) 6.9%

2 - 32 The Sisyphean Company has a bond outstanding with a face value of $5000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 8.2% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $4541.53, then the YTM for this bond is closest to _____. A) 7.9% B) 9.9% C) 13.8% D) 11.9%

B) 9.9%

2 - Q29 The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 5 years. The bond certificate indicates that the stated coupon rate for this bond is 10.0% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 7.5%, then this bond will trade at ____. A) A discount B) A premium C) Par D) None of the above

B) A premium

2 - Q39 What are dividend payments? A) The difference between the original cost price of a share and the price an investor receives when the share is sold B) A share of the profits paid to each shareholder on the basis of the number of shares they hold C) Incremental increases in the value of the stock held by an investor due to rises in share price D) Payments made to a company by investors for a share of the ownership of the company

B) A share of the profits paid to each shareholder on the basis of the number of shares they hold

1 - Q8 Which of the following would be best considered to be an agency conflict problem in the behavior of the following financial managers? A) Michael chooses to enhance his firm's reputation at some cost to its shareholders by sponsoring a team of athletes for the Olympics. B) Bill chooses to pursue a risky investment for the company's funds because his compensation will substantially rise if it succeeds. C) Sue instructs her staff to skip safety inspections in one of the company's factories, knowing that it will likely fail the inspection and incur significant costs to fix. D) James ignores an opportunity for his company to invest in a new drug to fight Alzheimer's disease, judging the drug's chances of succeeding as low.

B) Bill chooses to pursue a risky investment for the company's funds because his compensation will substantially rise if it succeeds.

1 - Q1 Which of the following best describes why the Valuation Principle is a key concept in making financial decisions? A) It allows fixed assets and liquid assets to be valued correctly. B) It shows how to make the costs and benefits of a decision comparable so that we can weigh them properly. C) It shows how to assign monetary value to intangibles such as good health and well-being. D) It gives a good indication of the net worth of a person, item, or company and can be used to estimate any changes in that net worth.

B) It shows how to make the costs and benefits of a decision comparable so that we can weigh them properly.

1 - Q17 Heavy Duty Company, a manufacturer of power tools, decided to offer a rebate of $130 on its 16-inch mid-range chain saw, which currently has a retail price of $490. Heavy Duty's marketers estimate that, as a result of the rebate, sales of this model will increase from 60,000 to 80,000 units next year. The profit margin for Heavy Duty before the rebate is $180. Based on the given information, is the decision to give the rebate a wise one? A) Yes, since the benefits are $7,300,000 more than the costs B) No, since the costs are $6,800,000 more than the benefits C) Yes, since the benefits are $3,400,000 more than the costs D) No, since the costs are $7,800,000 more than the benefits

B) No, since the costs are $6,800,000 more than the benefits

2 - Q35 Which of the following risk-free, zero-coupon bonds could be bought for the lowest price? A) One with a face value of $1,000, a YTM of 4.8%, and 5 years to maturity B) One with a face value of $1,000, a YTM of 5.9%, and 20 years to maturity C) One with a face value of $1,000, a YTM of 3.2%, and 8 years to maturity D) One with a face value of $1,000, a YTM of 6.8%, and 10 years to maturity

B) One with a face value of $1,000, a YTM of 5.9%, and 20 years to maturity

3 - Q21 You are opening up a brand new retail strip mall. You presently have more potential retail outlets wanting to locate in your mall that you have space available. What is the most appropriate tool to use if you are trying to determine the optimal allocation of your retail space? A) Payback period B) Profitability index C) Net present value (NPV) D) Internal rate of return (IRR)

B) Profitability index

3 - Q12 If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or B) will rank highest? A) Project A B) Project B C) Project and Project B have the same ranking D) Cannot calculate a payback period without a discount rate

B) Project B

1 - Q13 Which of the following is a measure of the aggregate price level of collections of pre-selected stocks? A) NASDAQ B) S&P 500 C) Euronext D) NYSE

B) S&P 500

3 - Q23 Which of the following best describes the Net Present Value rule? A) When choosing among any list of investment opportunities where resources are limited, always choose those projects with the highest net present value (NPV) B) Take any investment opportunity where the net present value (NPV) is not negative; turn down any opportunity when it is negative C) If the difference between the present cost of an investment and the present value (PV) of its benefits after a fixed number of years is positive the investment should be taken, otherwise it should be rejected D) Take any investment opportunity where the net present value (NPV) exceeds the opportunity cost of capital; turn down any opportunity where the cost of capital exceeds the net present value (NPV)

B) Take any investment opportunity where the net present value (NPV) is not negative; turn down any opportunity when it is negative

3 - Q13 A lottery winner can take $6 million now or be paid $600,000 at the end of each of the next 15 years. The winner calculates the internal rate of return (IRR) of taking the money at the end of each year and, estimating that the discount rate across this period will be 4%, decides to take the money at the end of each year. Was her decision correct? A) Yes, because it agrees with the payback rule B) Yes, because it agrees with the Net Present Value rule C) Yes, because it disagrees with the Net Present Value rule D) Yes, because it agrees with both the Net Present Value rule and the payback rule

B) Yes, because it agrees with the Net Present Value rule

2 - Q37 Which of the following formulas is INCORRECT? A) P0 = Div1 / (rE-g) B) rE = (Div1/P0) - g C) g = retention rate x return on new investment D) Div1 = EPSt x dividend payout rate

B) rE = (Div1/P0) - g

1 - Q18 Refer to the table above. An international seafood supplier is offered 9.52 million yen today for 1000 pounds of abalone frozen in the shell. One thousand pounds of abalone can be sourced from various countries at the prices shown above. The current market exchange rates between the United States and the other relevant currencies are also shown. In addition, $1 U.S. = 102 yen. What is the value, in U.S. dollars, of the best deal the international seafood supplier can make? A) $14,333 B) $14,833 C) $13,333 D) $12,333

C) $13,333

1 - Q38 Matthew wants to take out a loan to buy a car. He calculates that he can make repayments of $5000 per year. If he can get a four-year loan with an interest rate of 7.9%, what is the maximum price he can pay for the car? A) $23,237 B) $19,918 C) $16,598 D) $26,557

C) $16,598

1 - Q37 A bank is negotiating a loan. The loan can either be paid off as a lump sum of $80,000 at the end of four years, or as equal annual payments at the end of each of the next four years. If the interest rate on the loan is 6%, what annual payments should be made so that both forms of payment are equivalent? A) $25,602 B) $29,259 C) $18,287 D) $14,630

C) $18,287

3 - Q15 An investor is considering a project that will generate $900,000 per year for four years. In addition to upfront costs, at the completion of the project at the end of the fifth year there will be shut-down costs of $400,000. If the cost of capital is 4.4%, based on the MIRR, at what upfront costs does this project cease to be worthwhile? A) $2.62 million B) $3.21 million C) $2.91 million D) $3.50 million

C) $2.91 million

1 - Q34 Martin wants to provide money in his will for an annual bequest to whichever of his living relatives is oldest. That bequest will provide $4,000 in the first year, and will grow by 7% per year, forever. If the interest rate is 9%, how much must Martin provide to fund this bequest? A) $160,000.00 B) $100,000.00 C) $200,000.00 D) $240,000.00

C) $200,000.00

2 - Q27 Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1,000 and a coupon rate of 5.6% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: Assuming that Luther's bonds receive a AA rating, the number of bonds that Luther must issue to raise the needed $25 million is closest to _____. A) $33,417 B) $22,278 C) $27,848 D) $38,987

C) $27,848

2 - Q18 Suppose the term structure of interest rates is shown below: The present value (PV) of receiving $1100 per year with certainty at the end of the next three years is closest to _____. A) $4214 B) $36112 C) $3010 D) $2408

C) $3010

2 - Q17 What is the present value (PV) of an investment that pays $100,000 every year for four years if the interest rate is 5% APR, compounded quarterly? A) $424,581 B) $459,963 C) $353,818 D) $389,200

C) $353,818

2 - Q24 What is the coupon payment of a 15-year bond with a 9% coupon rate with semiannual payments? A) $1800.00 B) $150.00 C) $450 D) $900.00

C) $450

2 - Q48 Sunnyfax Publishing pays out all its earnings and has a share price of $37. In order to expand, Sunnyfax Publishing decided to cut its dividend from $3.00 to $2.00 per share and reinvest the retained funds. Once the finds are reinvested, they are expected to grow at a rate of 13%. If the reinvestment does not affect Sunnyfax's equity cost of capital, what is the expected share price as a consequence of this decision? A) $62.86 B) $36.67 C) $52.38 D) $41.90

C) $52.38

2 - Q38 A company has stock with costs $41.50 per share and pays a dividend of $2.50 per share this year. The company's cost of equity is 7%. What is the expected annual growth rate of the company's dividends? A) 1.96% B) 3.92% C) 0.98% D) 2.94%

C) 0.98%

3 - Q17 Two mutually exclusive investment opportunities require an initial investment of $7 million. Investment A pays $2.0 million per year in perpetuity, while investment B pays $1.4 million in the first year, with cash opportunities as being equivalent? A) 7% B) 3% C) 13% D) 15%

C) 13%

1 - Q41 You are considering investing in a zero-company bond that will pay you its face value of $1000 in twelve years. If the bond is currently selling for $496.97, then the internal rate of return (IRR) for investing in this bond is closest to ______. A) 8.2% B) 5.0% C) 6.0% D) 7.1%

C) 6.0%

2 - Q45 You expect KT industries (KTI) will have earnings per share of $5 this year and expect that they will pay out $1.25 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 13% and their equity cost of capital is 15%. The expected growth rate for KTI's dividends is closest to ____. A) 3.9% B) 5.9% C) 9.8% D) 11.3%

C) 9.8%

2 - Q30 A corporation issues a bond that generates the above cash flows. If the periods are of 3-month intervals, which of the following best describes that bond? A) A 15-year bond with a notional value of $5000 and a coupon rate of 1.2% paid annually B) A 60-year bond with a notional value of $5000 and a coupon rate of 4.6% paid quarterly C) A 15-year bond with a notional value of $5000 and a coupon rate of 4.6% paid quarterly D) A 30-year bond with a notional value of $5000 and a coupon rate of 3.5% paid semiannually

C) A 15-year bond with a notional value of $5000 and a coupon rate of 4.6% paid quarterly

1 - Q9 A factory owner wants his workers to produce as many widgets as they can so he pays his workers based on how many widgets they produce. However, in order to make sure that the workers do not rush and produce a large number of poorly made widgets, he checks the widgets at random at various stages of their manufacture. If a defect is found in a widget, the pay of the entire section of the factory responsible for that defect is docked. How is this factory owner seeking to solve the agency conflict problem in this case? A) By maximizing the information that the principal obtains about the behavior of the agents B) By making the agents into principals themselves C) By supplying incentives so the agents act in the way principal desires D) By ensuring that all workers co-operate to maximize the gains of their section

C) By supplying incentives so the agents act in the way principal desires

1 - Q3 Over four-fifths of all U.S. business revenue is generated by which of type of firms? A) Partnerships B) Sole proprietorships C) Corporations D) Limited partnerships

C) Corporations

3 - Q1 Most corporations measure the value of a project in terms of which of the following? A) Future value (FV) B) Discount value C) Present value (PV) D) Discount factor

C) Present value (PV)

1 - Q2 Which of the following types of firms does NOT have limited liability? A) Limited partnerships B) Corporations C) Sole proprietorships D) None of the above

C) Sole proprietorships

1 - Q16 Which of the following is NOT a financial statement that every public company is required to produce? A) Balance sheet B) Income statement C) Statement of sources and uses of cash D) Statement of stockholders' equity

C) Statement of sources and uses of cash

1 - Q12 Why is it difficult to determine the market price of a private corporation's shares at any point in time? A) It has a limited number of owners B) The price of its shares is fixed by the owners C) There is no organized market for its shares D) It is difficult to obtain enough information to accurately value such a company

C) There is no organized market for its shares

3 - Q27 Which of the following best describes why the predicted incremental earnings arising from a given decision are not sufficient in and of themselves to determine whether that decision is worthwhile? A) They do not show how the firm's earnings are expected to change as the result of a particular decision B) They are not easily predicted from historical financial statements of a firm and its competitors C) These earnings are not actual cash flows D) They do not tell how the decision affects the firm's reported profits from an accounting perspective

C) These earnings are not actual cash flows

3 - Q16 Which of the following is NOT a valid method of modifying cash flows to produce a MIRR? A) Discount all of the negative cash flows to the present and compound all of the positive cash flows to the end of the project B) Discount all of the negative cash flows to time 0 and leave the positive cash flows alone C) Turn multiple negative cash flows into a single negative cash flow by summing all negative cash flows over the project's lifetime D) Leave the initial cash flow alone and compound all of the remaining cash flows to the final period of the project

C) Turn multiple negative cash flows into a single negative cash flow by summing all negative cash flows over the project's lifetime

1 - Q22 Which of the following situations is best described by the timeline shown below? A) You receive payments of $250 per month for five months B) You receive payments of $250 per month for six months C) You make payments of $250 per month for six months D) You make payments of $250 per month for five months

C) You make payments of $250 per month for six months

1 - Q29 You are borrowing money to buy a car. If you can make payments of $320 per month starting one month from now at an interest rate of 12%, how much will you be able to borrow for the car today if you finance the amount over 4 years? A) $7291..00 B) $17,012.34 C) $14,582.00 D) $12,151.67

D) $12,151.67

1 - Q25 Sara wants to have $600,000 in her savings account when she retires. How much must she put in the account now, if the account pays a fixed interest rate of 8%, to ensure that she has $600,000 in 20 years? A) $231,712 B) $180, 221 C) $139,541 D) $128,729

D) $128,729

2 - Q34 Shown above is the information form FINRA regarding one of Bank of America's bonds. How much would the holder of such a bond earn each coupon payment for each $100 in face value of coupons are paid semiannually? A) $2.32 B) $1.49 C) $4.30 D) $2.15

D) $2.15

2 - Q40 Sinclair Pharmaceuticals, a small drug company, develops a vaccine that will protect against Helicobacter pylori, a bacteria that is the cause of a number of diseases of the stomach. It is expected that Sinclair Pharmaceuticals will experience extremely high growth over the next three years and will reinvest all of its earnings in expanding the company over this time. Earnings were $1.10 per share before the development of the vaccine and are expected to grow by 40% per year for the next three years. After this time, it is expected that growth will drop to 5% and stay there for the expected future. Four years from now Sinclair will pay dividends that are 75% of its earnings. If its equity cost of capital is 12%, what is the value of a share of Sinclair Pharmaceuticals today? A) $20.62 B) $33.96 C) $33.51 D) $24.17

D) $24.17

3 - Q8 An auto-parts company is deciding whether to sponsor a racing team for a cost of $1 million. The sponsorship would last for three years and is expected to increase cash flows by $570,000 per year. If the discount rate is 6.9%, what will be the change in the value of the company if it chooses to go ahead with the sponsorship? A) $747,896 B) $797,756 C) $847,615 D) $498,597

D) $498,597

1 - Q31 Since your first birthday, your grandparents have been depositing $100 into a savings account every month. The account pays 9% interest annually. Immediately after your grandparents make the deposit on your 18th birthday, the amount of money in your savings account will be closest to ______. A) $32,181 B) $64,362 C) $75,089 D) $53,635

D) $53,635

2 - Q31 The Sisyphean Company has a bond outstanding with face value of $1000 that reaches maturity in five years. The bond certificate indicates that the stated coupon rate for this bond is 8.5%, and that the coupon payments are to be made semiannually. Assuming that this bond trades for $1081.73, then the YTM for this bond is closest to ______. A) 7.87% B) 5.2% C) 9.18% D) 6.56%

D) 6.56%

1 - Q23 Why should you approach every problem by drawing a timeline? A) A timeline can be used to schedule events which are yet to occur B) A timeline eliminates the majority if flawed financial decisions C) A timeline allows you to quickly sum cash flows over time D) A timeline identifies events in a transaction or investment which might otherwise by easily overlooked

D) A timeline identifies events in a transaction or investment which might otherwise by easily overlooked

1 - Q20 Which of the following statements regarding the Law of One Price is INCORRECT? A) If equivalent goods or securities trade simultaneously in different competitive markets, then they will trade for the same price in both markets B) At any point in time, the price of two equivalent goods trading in different competitive markets will be the same C) One useful consequence of the Law of One Price is that when evaluating costs and benefits to compute a net present value (NPV), we can use any competitive price to determine a cash value, without checking the price in all possible markets D) An important property of the Law of One Price is that it holds even in markets where arbitrage is possible.

D) An important property of the Law of One Price is that it holds even in markets where arbitrage is possible.

1 - Q11 A corporate raider gains a controlling fraction of the shares of a poorly managed company and replaces the board of directors. How does the corporate raider hope to make a profit in this case? A) By the sale of the assets held by the company that hold most of its value B) By removing the employees expectations of the continued poor performance of the company C) By motivating the board of directors and other stakeholders in the company to make difficult short-term decisions that will increase the long-term viability of the company D) By the rise in the value of the stock held by the raider when the new board of directors is judged to be superior to the ousted board of directors

D) By the rise in the value of the stock held by the raider when the new board of directors is judged to be superior to the ousted board of directors

2 - Q20 Which of the following statements is FALSE? A) Interest rates we observe in the market will vary based on quoting conventions, the term of investment, and risk B) The opportunity cost of capital is the best available expected return offered in the market on an investment of comparable risk and term of the cash flows being discounted C) The opportunity cost of capital is the return the investor forgoes when the investor forgoes when the investor takes on a new investment D) For a risk-free project, the opportunity cost of capital will typically be greater than the interest rate of U.S. Treasury securities with a similar term

D) For a risk-free project, the opportunity cost of capital will typically be greater than the interest rate of U.S. Treasury securities with a similar term

2 - Q41 Which of the following statements is FALSE regarding profitable and unprofitable growth? A) If a firm retains more earnings, it will pay out less of those earnings, reducing its dividends B) Cutting a firm's dividend to increase investment will raise the stock price if the new investment has a positive net present value (NPV) C) A firm can increase its growth rate by retaining more of its earnings D) If a firm wants to increase its share price, it must diversify

D) If a firm wants to increase its share price, it must diversify

2 - Q22 Consider the following investment alternatives: Which alternative offers you the highest effective rate of return? A) Investment A B) Investment B C) Investment C D) Investment D

D) Investment D

3 - Q20 A print shop has contracted to print a number of jobs within 24 hours. Any jobs not completely printed within this time will result in a penalty, as shown in the table above. However too many jobs have been accepted, and not all can be printed. Which jobs should be printed in the next 24 hours? A) Job D, Job A, and Job E B) Job C and Job B C) Job D and Job A D) Job C, Job B, and Job E

D) Job C, Job B, and Job E

1 - Q6 A sole proprietorship is owned by _______. A) Shareholders B) Two or more persons C) Bankers D) One person

D) One person

3 - Q14 Mary is in contract negotiations with a publishing house for her new novel. She has two options. She may be paid $100,000 up front and receive royalties that are expected to total $26,000 at the end of each of the next five years. Alternatively, she can receive $200,000 up front and no royalties. Which of the following investment rules would indicate that she should take the former deal, given a discount rate of 8%? Rule I: The Net Present Value rule Rule II: The Payback Rule with a payback period of two years Rule III: The internal rate of return (IRR) Rule A) Rule II and III B) Rule I and II C) Rule III only D) Rule I only

D) Rule I only

3 - Q2 Tanner is choosing between two investment options. He can invest $500 now and get (guaranteed) $550 in one year, or invest $500 now and get (guaranteed) $531.40 back later today. The risk-free rate is 3.5%. Which investment should Tanner prefer? A) $531.40 later today, since $1 today is worth more than $1 in one year B) $550 in one year, since it is $50 more than he invested rather than $31.40 more than he invested C) Neither - both investments have a negative NPV D) Tanner should be indifferent between the two investments, since both are equivalent to the same amount of cash today.

D) Tanner should be indifferent between the two investments, since both are equivalent to the same amount of cash today.

3 - Q26 Which of the following best defines incremental earnings? A) The net present value (NPV) of earnings that a firm is expected to receive as the result of an investment decision B) The earnings arising from all projects that a company plans to undertake in a fixed time span C) Cash flows arising from a particular investment decision D) The amount by which a firm's earnings are expected to change as a result of an investment decision

D) The amount by which a firm's earnings are expected to change as a result of an investment decision

1 - Q10 In which of the following relationships is an agency conflict problem LEAST likely to arise? A) The relationship between a hire-car company and the persons who hire that company's cars regarding the treatment of those cars. B) The relationship between high-level military officers and the soldiers who service under them regarding the willingness of the soldiery to take risks C) The relationship between a restaurateur and the suppliers of produce to that restaurant regarding the freshness of the produce supplied D) The relationship between a driver and the passengers in a car regarding the safe driving of that car

D) The relationship between a driver and the passengers in a car regarding the safe driving of that car

3 - Q9 The owner of a hair salon spends $1,000,000 to renovate its premises, estimating that this will increase her cash flow by $220,000 per year. She constructs the above graph, which shows the net present value (NPV) as a function of the discount rate. At what dollar value should the NPV profile cross the vertical axis? A) $1,000,000 B) $780,000 C) Cannot be determined because inadequate information is given D) The vertical axis crossing point cannot be calculated since the cash inflows are in perpetuity

D) The vertical axis crossing point cannot be calculated since the cash inflows are in perpetuity

2 - Q33 Which of the following statements regarding bonds and their terms is FALSE? A) The internal rate of return (IRR) of an investment in a zero-coupon bond is the rate of return that investors will earn on their money if they buy a default-free bond at its current price and hold it to maturity B) Financial professionals also use the term spot interest rates to refer to the default-free zero-coupon yields C) When we calculate a bond's yield to maturity by solving the formula, Price of an n-period bond = Coupon/(1+YTM)^1 + Coupon/(1+YTM)^2 + ..... + (Coupon + Face)/(1+YTM)^n D) The yield to maturity of a bond is the discount rate that sets the future value (FV) of the promised bond payments equal to the current market price of the bond

D) The yield to maturity of a bond is the discount rate that sets the future value (FV) of the promised bond payments equal to the current market price of the bond

1 - Q7 Which of the following is NOT an advantage of a sole proprietorship? A) Single taxation B) Ease of setup C) No separation of ownership and control D) Unlimited liability

D) Unlimited liability