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Principles of Corporate Finance Study Set 3

Business

Quiz 12 :

Agency Problems and Investment

Quiz 12 :

Agency Problems and Investment

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When firms award stock options to managers as incentives, they typically set the exercise price of these options equal to the firm's
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A

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The following capital expenditures are typically included in a firm's capital budget:
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D

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CEO compensation is generally highest in
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A

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Generally, firms should attempt to base mangers' compensation on
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Agency costs can be thought of as the loss in the value of a firm resulting from the following actions by managers:
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In large public companies, monitoring is the primary responsibility of the
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Since monitoring is not perfect, compensation plans should primarily provide managers incentives to
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Managers on a fixed salary often fall victim to the following temptations:
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The following actions by managers are examples of overinvestment:
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A firm has an average investment of $1,000 during the year. During the same time, the firm generates after-tax earnings of $150. Calculate the economic value added (EVA)for the firm. (The cost of capital is 10 percent.)
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The free-rider problem, when referring to monitoring of the firms' performance, often results in
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The ultimate responsibility for monitoring a firm rests with the
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The following are agency problems associated with capital budgeting except
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In the principal-agent framework, the ultimate principals are I.managers; II.board of directors; III.shareholders; IV.governments
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Agency costs can be reduced by
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Monitoring is typically done by
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Which of the following capital expenditures may not appear in a firm's capital budget?
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The following are agency problems associated with capital budgeting:
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The following are agency problems in capital budgeting except
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A firm has an average investment of $1,000 during the year. During the same time, the firm generates after-tax earnings of $150. If the cost of capital is 10 percent, what is the net return on investment?
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