Econ Midterm

Question 1

5 out of 5 points

Which of the following will increase (V0), the shareholder wealth maximization model of the firm:

V0∙(shares outstanding) = Σ∞t=1 (π t ) / (1+ke)t + Real Option Value.

Answer

Selected Answer:

Decrease the required rate of return (ke).

Correct Answer:

Decrease the required rate of return (ke).

Question 2

5 out of 5 points

The primary objective of a for-profit firm is to ___________.

Answer

Selected Answer:

maximize shareholder value

Correct Answer:

maximize shareholder value

Question 3

5 out of 5 points

The Saturn Corporation (once a division of GM) was permanently closed in 2009. What went wrong with Saturn?

Answer

Selected Answer:

Saturn sold cars below the prices of Honda or Toyota, earning a low 3% rate of return.

Correct Answer:

Saturn sold cars below the prices of Honda or Toyota, earning a low 3% rate of return.

Question 4

5 out of 5 points

Economic profit is defined as the difference between revenue and ____.

Answer

Selected Answer:

total economic cost

Correct Answer:

total economic cost

Question 5

5 out of 5 points

The net present value of an investment represents

Answer

Selected Answer:

the expected contribution of that investment to the goal of shareholder wealth maximization

Correct Answer:

the expected contribution of that investment to the goal of shareholder wealth maximization

Question 6

5 out of 5 points

The closest example of a risk-free security is

Answer

Selected Answer:

U.S. Government Treasury bills

Correct Answer:

U.S. Government Treasury bills

Question 7

5 out of 5 points

The ____ is the ratio of ____ to the ____.

Answer

Selected Answer:

coefficient of variation; standard deviation; expected value

Correct Answer:

coefficient of variation; standard deviation; expected value

Question 8

5 out of 5 points

The primary difference(s) between the standard deviation and the coefficient of...