Question 1. The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to _________.
- maximize its expected total corporate income
- maximize its expected EPS
- minimize the chances of losses
- maximize the stock price per share over the long run, which is the stock's intrinsic value
- maximize the stock price on a specific target date
Question 2. What's the future value of $2,000 after 3 years if the appropriate interest rate is 8%, compounded semiannually?
- $2,854.13
- $2,781.45
- $2,324.89
- $2,011.87
- $2,530.64
Question 3. You own an oil well that will pay you $25,000 per year for 8 years, with the first payment being made today. If you think a fair return on the well is 7%, how much should you ask for if you decide to sell it?
- $159,732
- $116,110
- $217,513
- $315,976
- $288,349
Question 4. Suppose you borrowed $25,000 at a rate of 8% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would your payments be?
- $7,691.45
- $7,548.02
- $7,324.89
- $7,011.87
- $7,854.13
Question 5. If a bank loan officer were considering a company's request for a loan, which of the following statements would you consider to be CORRECT?
- The lower the company's TIE ratio, other things held constant, the lower the interest rate the bank would charge the firm.
- The lower the company's EBITDA coverage ratio, other things held constant, the lower the interest rate the bank would charge the firm.
- Other things held constant, the lower the current asset ratio, the lower the interest rate the bank would charge the firm.
- Other things held constant, the lower the debt ratio, the lower the interest rate the bank would charge the firm.
- Other things held constant, the higher the debt ratio, the lower the interest rate the bank would charge the firm.