Quiz 1

One reason that the value of most businesses is maximized if they are organized as a corporation is that:

it is easier to transfer ownership of a corporation (corporations are more liquid assets).

Which of the following actions are likely to reduce agency conflicts between stockholders and managers?

Increasing the threat of corporate takeover

Which of the following factors tend to encourage management to pursue stock price maximization as a goal?

Statements a and b are both correct.

Financial statements are primarily designed for use by managers.

False

Depreciation:

All of the above are true

The income statement:

summarizes the firms revenues and expenses over an accounting period.

In its recent income statement, Smith Software Inc. reported $23 million of net income, and in its year-end balance sheet, Smith reported $449 million of retained earnings. The previous year, its balance sheet showed $438 million of retained earnings. What were the total dividends paid to shareholders during the most recent year? (Answers are in $ millions.)

$12.00

Hayes Corporation has $423 million of common equity on its balance sheet and 9,000,000 shares of common stock outstanding. The company's Market Value Added (MVA) is $84 million. What is the company's stock price?

$56.33

Cox Corporation recently reported an EBITDA of $66 million and $10 million of net income. The company has $10 million interest expense and the corporate tax rate is 40.0% percent. What was the company's depreciation and amortization expense? (Answers are in $ millions.)

$39.33