FINC 341 EXAM 1 THEORY EXAM 2026/2027QUESTIONS AND
CORRECT ANSWERS 2 VERSIONS CURRENTLY TESTING
COMPLETE QUESTIONS WITH DETAILED VERIFIED ANSWERS
/ALREADY GRADED A+
If a firm's equity multiplier is 1, the firm does not have any debt in its capital
structure - ANSWER-TRUE
A firm's EVA is highly correlated with its stock price - ANSWER-TRUE
EVA is different from net income in that EVA takes out the cost of debt and the
cost of equity, NI does not take out the cost of equity - ANSWER-TRUE
When two projects of different size (of investment) are compared using ROE, the
one with the lower ROE might add more dollar value to the firm than the other one
- ANSWER-TRUE
If a manager's bonus depends on the company's ROE, and the manager wants to
maximize his/her bonus, that manager will not accept all projects with a profitable
ROE - ANSWER-TRUE
If a company uses more debt and less capital - ANSWER-ROE would increase
ROA would decrease a little
If a company uses less debt and more capital - ANSWER-ROE would decrease
ROA would increase a little
President Biden's most recent proposal supported changing the corporate tax rate
from a flat 21% to a flat 26.5% - ANSWER-TRUE
1
,President Biden is not trying to get a 2.8 trillion stimulus bill passed - ANSWER-
TRUE
if you buy a stock and sell it after 8 months for a gain, you will owe your ordinary
tax rate on that gain - ANSWER-TRUE
corporations do not have caps on capital gains tax rates - ANSWER-TRUE
if an individual has 12,000 of capital gains and 19,000 of capital losses this year,
that person will pay no tax on the capital gains, will be able to keep 3,000 of his
salary from being taxed this year, and then carry 4000 of capital loss forward to the
next tax year - ANSWER-TRUE
Management's goal should be to take actions designed to maximize a firm's
intrinsic value - ANSWER-TRUE
An S corporation has single taxation - ANSWER-TRUE
the way the corporate tax system was structured prior to 2018 definitely favored
debt financing over equity financing since interest expense is tax deductible and
dividends are not. Since the corporate tax rate was lowered, debt financing does
not have much of an advantage anymore. - ANSWER-TRUE
The corporate alternative minimum tax rule was kept, but individuals still have to
abide by the alternative minimum tax rule - ANSWER-TRUE
The TC&J act lowered the maximum tax rate for individuals from 39.6% to 37% -
ANSWER-TRUE
2
, After the 2008 financial crisis, the fed used 3 rounds of quantitative easing to
increase the money supply, and considered using a fourth round. - ANSWER-
TRUE
when inflation is high, the federal reserve decreases the money supply, which in
turn will raise short term interest rates. - ANSWER-TRUE
when the fed raises the reserve requirement, interest rates are pushed upwards -
ANSWER-TRUE
If expected inflation increases less within some foreign country than in the United
States, the value of that country's currency is likely to increase compared to US
currency. - ANSWER-TRUE
when jerome powell became chairman of the federal reserve, the fed increased the
interest rate multiple times, making US exporters have a harder time since the
value of the dollar had increased - ANSWER-TRUE
When I took students to france for six weeks in 2001, they benefitted from the
exchange rate fluctuation when I wired the extra money back into their TAMU
accounts - ANSWER-TRUE
after the financial crisis of 2008, the fed funds rate went down to the range of 0-
0.25%, and stayed at that rate until the fed finally decided to start increasing the
rate in 2015 - ANSWER-TRUE
the spread between yield curves of corporate bonds and treasury bonds is larger the
longer the maturity because the corporate bonds are considered to have more risk
3
CORRECT ANSWERS 2 VERSIONS CURRENTLY TESTING
COMPLETE QUESTIONS WITH DETAILED VERIFIED ANSWERS
/ALREADY GRADED A+
If a firm's equity multiplier is 1, the firm does not have any debt in its capital
structure - ANSWER-TRUE
A firm's EVA is highly correlated with its stock price - ANSWER-TRUE
EVA is different from net income in that EVA takes out the cost of debt and the
cost of equity, NI does not take out the cost of equity - ANSWER-TRUE
When two projects of different size (of investment) are compared using ROE, the
one with the lower ROE might add more dollar value to the firm than the other one
- ANSWER-TRUE
If a manager's bonus depends on the company's ROE, and the manager wants to
maximize his/her bonus, that manager will not accept all projects with a profitable
ROE - ANSWER-TRUE
If a company uses more debt and less capital - ANSWER-ROE would increase
ROA would decrease a little
If a company uses less debt and more capital - ANSWER-ROE would decrease
ROA would increase a little
President Biden's most recent proposal supported changing the corporate tax rate
from a flat 21% to a flat 26.5% - ANSWER-TRUE
1
,President Biden is not trying to get a 2.8 trillion stimulus bill passed - ANSWER-
TRUE
if you buy a stock and sell it after 8 months for a gain, you will owe your ordinary
tax rate on that gain - ANSWER-TRUE
corporations do not have caps on capital gains tax rates - ANSWER-TRUE
if an individual has 12,000 of capital gains and 19,000 of capital losses this year,
that person will pay no tax on the capital gains, will be able to keep 3,000 of his
salary from being taxed this year, and then carry 4000 of capital loss forward to the
next tax year - ANSWER-TRUE
Management's goal should be to take actions designed to maximize a firm's
intrinsic value - ANSWER-TRUE
An S corporation has single taxation - ANSWER-TRUE
the way the corporate tax system was structured prior to 2018 definitely favored
debt financing over equity financing since interest expense is tax deductible and
dividends are not. Since the corporate tax rate was lowered, debt financing does
not have much of an advantage anymore. - ANSWER-TRUE
The corporate alternative minimum tax rule was kept, but individuals still have to
abide by the alternative minimum tax rule - ANSWER-TRUE
The TC&J act lowered the maximum tax rate for individuals from 39.6% to 37% -
ANSWER-TRUE
2
, After the 2008 financial crisis, the fed used 3 rounds of quantitative easing to
increase the money supply, and considered using a fourth round. - ANSWER-
TRUE
when inflation is high, the federal reserve decreases the money supply, which in
turn will raise short term interest rates. - ANSWER-TRUE
when the fed raises the reserve requirement, interest rates are pushed upwards -
ANSWER-TRUE
If expected inflation increases less within some foreign country than in the United
States, the value of that country's currency is likely to increase compared to US
currency. - ANSWER-TRUE
when jerome powell became chairman of the federal reserve, the fed increased the
interest rate multiple times, making US exporters have a harder time since the
value of the dollar had increased - ANSWER-TRUE
When I took students to france for six weeks in 2001, they benefitted from the
exchange rate fluctuation when I wired the extra money back into their TAMU
accounts - ANSWER-TRUE
after the financial crisis of 2008, the fed funds rate went down to the range of 0-
0.25%, and stayed at that rate until the fed finally decided to start increasing the
rate in 2015 - ANSWER-TRUE
the spread between yield curves of corporate bonds and treasury bonds is larger the
longer the maturity because the corporate bonds are considered to have more risk
3
