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Financial Mgmt Practice Exam

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PRACTICE FINAL EXAM (Answers provided at practice test’s end)

The following questions are worth 3 points each. Provide the single best response.

1. The primary goal of a publicly-owned firm interested in serving its stockholders should be to
|a. |Maximize expected total corporate profit. |
|b. |Maximize expected EPS. |
|c. |Minimize the chances of losses. |
|d. |Maximize the stock price per share. |
|e. |Maximize expected net income. |

2. Which of the following actions are likely to reduce agency conflicts between stockholders and managers?
|a. |Paying managers a large fixed salary. |
|b. |Increasing the threat of corporate takeover. |
|c. |Placing restrictive covenants in debt agreements. |
|d. |All of the statements above are correct. |
|e. |Statements b and c are correct. |

3. In recent years, both expected inflation and the market risk premium (kM - kRF) have declined. Assume that all stocks have positive betas. Which of the following is likely to have occurred as a result of these changes?
|a. |The average

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