In a competitive marketplace, if managers deviate too far from making decisions that are consistent with stockholder wealth maximization, they risk being disciplined by the market. Part of this discipline involves the threat of being taken over by groups who are more aligned with stockholder interests.

True / False

If a bond is callable, and if interest rates in the economy decline, then the company can sell a new issue of low-interest-rate bonds and use the proceeds to “call” the old bonds in and have effectively refinanced at a lower rate.

True / False

Preferred stock is a hybrid–a sort of cross between a common stock and a bond–in the sense that it pays dividends that normally increase annually like a stock, but its payments are contractually guaranteed like interest on a bond.

True / False

All else equal, a dollar received sooner is worth more than a dollar received at some later date, because the sooner the dollar is received the more quickly it can be invested to earn a positive return.

True / False

Current cash flow from existing assets is highly relevant to the investor. However, the value of the firm depends primarily upon its growth opportunities. As a result, profit projections from those opportunities are the only relevant future flows with which investors are concerned.

True / False

Determining whether a firm’s financial position is improving or deteriorating requires analysis of more than one set of financial statements. Trend analysis is one method of measuring a firm’s performance over time.

True / False

A firm’s net income reported on its income statement must equal the operating cash flows on the statement of cash flows.

True / False

The Securities Exchange Commission is the U.S. government agency that regulates the issuance and trading of stocks and bonds.

True / False

Compounding is the process of converting today’s values, which are termed present value, to future value.

True / False

Risk really should not be a significant factor when making financial decision because all business decisions involve predictions about the future, which is unknown. As a result, all decisions automatically include some consideration of risk.

True / False

Market risk refers to the tendency of a stock to move with the general stock market. A stock with above-average market risk will tend to be more volatile than an average stock, and it will have a beta which is greater than 1.0.

True / False

A firm cannot change its beta through any managerial decision because betas are completely market determined.

True / False

From an investor’s perspective, a firm’s preferred stock is generally considered to be less risky than its common stock but riskier than its bonds. However, from a corporate issuer’s standpoint, these risk relationships are reversed: bonds are the riskiest for the firm, preferred is next, and common is least risky.Please complete some T/F questions and multiple-choice questions. And please show a little about your calculations after the multiple-choice questions. Thank you.