AGEC 365 FINAL Exam Questions and
Answers Graded A+
A Common risk mitigation strategy is diversification. For a farm that is considering
diversifying into a second enterprise, which of the following statements is TRUE?
- Correct answer-The farm can reduce its overall risk without having to accept a
lower expected return
As leverage increases, cost of equity also increases. This is because: - Correct
answer-Leverage increases the farm financial risk so investors demand higher
compensation
According to pecking order theory, firms rise capital according to the following
hierarchy: - Correct answer-Retained Captial, Debt, Equity
Optimal Leverage is found where: - Correct answer-The weighted average cost of
capital is minimized
True or False: A risky asset is always a poor choice and must be avoided - Correct
answer-False
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
Answers Graded A+
A Common risk mitigation strategy is diversification. For a farm that is considering
diversifying into a second enterprise, which of the following statements is TRUE?
- Correct answer-The farm can reduce its overall risk without having to accept a
lower expected return
As leverage increases, cost of equity also increases. This is because: - Correct
answer-Leverage increases the farm financial risk so investors demand higher
compensation
According to pecking order theory, firms rise capital according to the following
hierarchy: - Correct answer-Retained Captial, Debt, Equity
Optimal Leverage is found where: - Correct answer-The weighted average cost of
capital is minimized
True or False: A risky asset is always a poor choice and must be avoided - Correct
answer-False
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
