FIN 301 UNLV CHAPTERS 1-3 CHOI
EXAM QUESTIONS AND ANSWERS
Shareholder Wealth - Answer-Represented by market price of a firm's common stock.
Present Value - Answer-the value today of some future payment or stream of payments
evaluated at an appropriate discount rate.
Discount Rate - Answer-takes into account the returns that are available from
alternative investment opportunities during a specific (future) time period.
Risk - Answer-"the greater the risk associated with receiving a future benefit, the lower
the value investors place on that benefit.
Market Value - Answer-the price at which the stock trades in the marketplace, such as
the NYSE
Shareholder Wealth (formula) - Answer-# of shares outstanding X Market price per
share
Stakeholder Concerns (5) - Answer-1. sustain optimum ROI
2. perceived by customers as a provider of quality service
3. demonstrate that employees are our most valuable resource
4. provide corporate leadership to the community
5. operate compatibly with environmental standards
Stakeholders - Answer-Customers, employees, suppliers, communities in which they
operate.
not just the interest of stockholders.
Agency Relationships - Answer-occur when one or more individuals (the principals) hire
another individual (the agent) to perform a service on behalf of the principals.
Agency Cost - Answer-are incurred by shareholders to minimize agency problems.
Exercise Price - Answer-Stock options granted to managers entitle them to buy shares
of the company at a particular price.
Profit - Answer-(or earnings/ or income) ***
Book Value - Answer-The book values reflects the historic cost of assets, not the
earning capacity of those assets.
EXAM QUESTIONS AND ANSWERS
Shareholder Wealth - Answer-Represented by market price of a firm's common stock.
Present Value - Answer-the value today of some future payment or stream of payments
evaluated at an appropriate discount rate.
Discount Rate - Answer-takes into account the returns that are available from
alternative investment opportunities during a specific (future) time period.
Risk - Answer-"the greater the risk associated with receiving a future benefit, the lower
the value investors place on that benefit.
Market Value - Answer-the price at which the stock trades in the marketplace, such as
the NYSE
Shareholder Wealth (formula) - Answer-# of shares outstanding X Market price per
share
Stakeholder Concerns (5) - Answer-1. sustain optimum ROI
2. perceived by customers as a provider of quality service
3. demonstrate that employees are our most valuable resource
4. provide corporate leadership to the community
5. operate compatibly with environmental standards
Stakeholders - Answer-Customers, employees, suppliers, communities in which they
operate.
not just the interest of stockholders.
Agency Relationships - Answer-occur when one or more individuals (the principals) hire
another individual (the agent) to perform a service on behalf of the principals.
Agency Cost - Answer-are incurred by shareholders to minimize agency problems.
Exercise Price - Answer-Stock options granted to managers entitle them to buy shares
of the company at a particular price.
Profit - Answer-(or earnings/ or income) ***
Book Value - Answer-The book values reflects the historic cost of assets, not the
earning capacity of those assets.
