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Principles of Corporate Finance Study Set 3

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Quiz 12 : Agency Problems and Investment

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

A

The following capital expenditures are typically included in a firm's capital budget:
Free
Multiple Choice

D

CEO compensation is generally highest in
Free
Multiple Choice

A

Generally, firms should attempt to base mangers' compensation on
Multiple Choice
Agency costs can be thought of as the loss in the value of a firm resulting from the following actions by managers:
Multiple Choice
In large public companies, monitoring is the primary responsibility of the
Multiple Choice
Since monitoring is not perfect, compensation plans should primarily provide managers incentives to
Multiple Choice
Managers on a fixed salary often fall victim to the following temptations:
Multiple Choice
The following actions by managers are examples of overinvestment:
Multiple Choice
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.)
Multiple Choice
The free-rider problem, when referring to monitoring of the firms' performance, often results in
Multiple Choice
The ultimate responsibility for monitoring a firm rests with the
Multiple Choice
The following are agency problems associated with capital budgeting except
Multiple Choice
In the principal-agent framework, the ultimate principals are I.managers; II.board of directors; III.shareholders; IV.governments
Multiple Choice
Agency costs can be reduced by
Multiple Choice
Monitoring is typically done by
Multiple Choice
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?