FINA 3770 UNT Exam 1 Concept
Questions Test Questions All Answered
Correct (2025) Version.
C.1 Shareholder wealth maximization means - Answer C) maximizing the price of existing
common stock
C.1 A financial manager is considering two projects, A and B. A is expected to add $2 million to
profits this
year while B is expected to add $1 million to profits this year. Which of the following statements
is MOST
correct? Concept questions - Answer D) The manager should select the project that causes the
stock price to increase the most, which could be A or B.
C.1 The five basic principles of finance include all of the following EXCEPT - Answer D)
Incremental profits determine value.
C.1 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 - Answer C) open above $20 because the positive news will result in a
higher valuation even though the stock has
not yet traded.
C.1 Investors want a return that satisfies the following expectation(s): - Answer A) A return for
delaying consumption
B) An additional return for taking on risk
D) Both A and B. ***
C.1 Company A reports sales of $100,000 and net income of $15,000. Company B reports sales
, C.1 The principle of risk-return trade-off means that - Answer C) a rational investor will only
take on higher risk if he expects a higher return.
D) an investor who bought stock in a small corporation five years ago has more money than an
investor
who bought U.S. Treasury bonds five years ago.
C.1 Investors generally don't like risk. Therefore, a typical investor - Answer C) will only take on
additional risk if he expects to be compensated in the form of additional return.
C.1 All of the following statements about agency problems are true EXCEPT - Answer B)
Agency costs are paid by the managers who do not act in the shareholders' best interest
C.1 Ethical behavior - Answer D) is essential in business because unethical behavior destroys
trust and business relationships.
C.1 John invested $1,000 in a risky investment and Bill invested $1,000 in a less risky
investment. One year
later, Bill's investment is worth $1,030. Which of the following statements is MOST correct? -
Answer D) The worth of John's investment cannot be determined with the information given.
C.1 When evaluating an investment project, which of the following best describes the financial
information needed by the decision maker? - Answer B) after-tax incremental cash flows to
the company as a whole
C.1 High Tech Corp. cut its research and development budget in 2010 by $4,000,000 in order to
improve
its cash flow for the year. Which of the following statements is MOST correct? - Answer B) The
stock price may decrease because investors may predict that future cash flows will decrease due
to
the lack of innovation and new products.
C.1 Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits
against it. If
Joe invests and the business loses the lawsuits, the most Joe can lose is - Answer C) $10,000 if
Questions Test Questions All Answered
Correct (2025) Version.
C.1 Shareholder wealth maximization means - Answer C) maximizing the price of existing
common stock
C.1 A financial manager is considering two projects, A and B. A is expected to add $2 million to
profits this
year while B is expected to add $1 million to profits this year. Which of the following statements
is MOST
correct? Concept questions - Answer D) The manager should select the project that causes the
stock price to increase the most, which could be A or B.
C.1 The five basic principles of finance include all of the following EXCEPT - Answer D)
Incremental profits determine value.
C.1 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 - Answer C) open above $20 because the positive news will result in a
higher valuation even though the stock has
not yet traded.
C.1 Investors want a return that satisfies the following expectation(s): - Answer A) A return for
delaying consumption
B) An additional return for taking on risk
D) Both A and B. ***
C.1 Company A reports sales of $100,000 and net income of $15,000. Company B reports sales
, C.1 The principle of risk-return trade-off means that - Answer C) a rational investor will only
take on higher risk if he expects a higher return.
D) an investor who bought stock in a small corporation five years ago has more money than an
investor
who bought U.S. Treasury bonds five years ago.
C.1 Investors generally don't like risk. Therefore, a typical investor - Answer C) will only take on
additional risk if he expects to be compensated in the form of additional return.
C.1 All of the following statements about agency problems are true EXCEPT - Answer B)
Agency costs are paid by the managers who do not act in the shareholders' best interest
C.1 Ethical behavior - Answer D) is essential in business because unethical behavior destroys
trust and business relationships.
C.1 John invested $1,000 in a risky investment and Bill invested $1,000 in a less risky
investment. One year
later, Bill's investment is worth $1,030. Which of the following statements is MOST correct? -
Answer D) The worth of John's investment cannot be determined with the information given.
C.1 When evaluating an investment project, which of the following best describes the financial
information needed by the decision maker? - Answer B) after-tax incremental cash flows to
the company as a whole
C.1 High Tech Corp. cut its research and development budget in 2010 by $4,000,000 in order to
improve
its cash flow for the year. Which of the following statements is MOST correct? - Answer B) The
stock price may decrease because investors may predict that future cash flows will decrease due
to
the lack of innovation and new products.
C.1 Joe is deciding whether or not to invest $10,000 in a business that has pending lawsuits
against it. If
Joe invests and the business loses the lawsuits, the most Joe can lose is - Answer C) $10,000 if
