Question 1 3 out of 3 points
To reduce Agency Problems, executive compensation should be designed to:
Correct Answer: create incentives so that managers act like owners of the firm.
Question 2 3 out of 3 points
In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.
Correct Answer: profits (cash flows)
Question 3 3 out of 3 points
The primary objective of a for-profit firm is to ___________.
Correct Answer: maximize shareholder value
Question 4 0 out of 3 points
The Saturn Corporation (once a division of GM) was ...view middle of the document...
Correct Answer: Decrease the required rate of return (ke).
Question 10 3 out of 3 points
Economic profit is defined as the difference between revenue and ____.
Correct Answer: total economic cost
Question 11 0 out of 3 points
The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)
Correct Answer: 15.87%
Question 12 3 out of 3 points
The ____ is the ratio of ____ to the ____.
Correct Answer: coefficient of variation; standard deviation; expected value
Question 13 3 out of 3 points
The closest example of a risk-free security is
Correct Answer: U.S. Government Treasury bills
Question 14 0 out of 3 points
Generally, investors expect that projects with high expected net present values also will be projects with
Correct Answer: high risk
Question 15 3 out of 3 points
A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.
Correct Answer: marginal costs