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You own 100 shares in a corporation. The corporation earns $5.00 per share before taxes. Once the corporation has paid any corporate taxes that are due, it will distribute the rest of its earnings to its shareholders in the form of a dividend. If the corporate tax rate is 40% and your personal tax rate on (both dividend and non-dividend) income is 30%, then how much money is left for you after all taxes have been paid?


A) $210
B) $300
C) $350
D) $500

Correct Answer

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The Principal-Agent Problem arises:


A) because managers have little incentive to work in the interest of shareholders when this means working against their own self-interest.
B) because of the separation of ownership and control in a corporation.
C) Both A and B
D) None of the above

Correct Answer

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Which of the following statements regarding limited partnerships is TRUE?


A) There is no limit on a limited partner's liability.
B) A limited partner's liability is limited by the amount of their investment.
C) A limited partner is not liable until all the assets of the general partners have been exhausted.
D) A general partner's liability is limited by the amount of their investment.

Correct Answer

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Use the table for the question(s) below. Consider the following two quotes for XYZ shares: Use the table for the question(s) below. Consider the following two quotes for XYZ shares: -How much would you have to pay to purchase 100 XYZ shares on November 18th? A) $2520 B) $2525 C) $2593 D) $2600 -How much would you have to pay to purchase 100 XYZ shares on November 18th?


A) $2520
B) $2525
C) $2593
D) $2600

Correct Answer

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Which of the following statements is FALSE?


A) In bankruptcy, management is given the opportunity to reorganize the firm and renegotiate with debt holders.
B) Because a corporation is a separate legal entity, when it fails to repay its debts, the people who lent to the firm, the debt holders are entitled to seize the assets of the corporation in compensation for the default.
C) As long as the corporation can satisfy the claims of the debt holders, ownership remains in the hands of the equity holders.
D) If the corporation fails to satisfy debt holders' claims, debt holders may lose control of the firm.

Correct Answer

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If you buy shares of Coca-Cola on the secondary market:


A) Coca-Cola receives the money because the company has issued new shares.
B) you buy the shares from another investor who decided to sell the shares.
C) you buy the shares from a Stock Exchange.
D) you buy the shares from the goverment.

Correct Answer

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Use the table for the question(s)below. Consider the following two quotes for XYZ shares: Use the table for the question(s)below. Consider the following two quotes for XYZ shares: -Explain the main differences between the NYSE and NASDAQ stock markets. -Explain the main differences between the NYSE and NASDAQ stock markets.

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Key points:
NYSE has physical location-N...

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Which of the following is/are an advantage of incorporation?


A) Access to capital markets
B) Limited liability
C) Unlimited life
D) All of the above

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If you buy shares of Coca-Cola on the primary market:


A) Coca-Cola receives the money because the company has issued new shares.
B) you buy the shares from another investor who decided to sell the shares.
C) you buy the shares from a Stock Exchange.
D) you buy the shares from the government.

Correct Answer

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You are a shareholder in a corporation. This corporation earns $4 per share before taxes. After it has paid taxes, it will distribute the remainder of its earnings to you as a dividend. The dividend is income to you, so you will then pay taxes on these earnings. The corporate tax rate is 35% and your tax rate on dividend income is 15%. The effective tax rate on your share of the corporation's earnings is closest to:


A) 15%
B) 35%
C) 45%
D) 50%

Correct Answer

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Do corporate decisions that increase the value of the firm's equity benefit society as a whole?


A) Yes, as long as the value of the firm's equity increases, society is better off.
B) Yes, as long as the increase in the value of the firm's equity does not come at the expense of others.
C) No, any gain in the value of the firm's equity is always less than the cost to society.
D) No, any gains in the value of the firm's equity are perfectly offset by societal costs.

Correct Answer

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If shareholders are unhappy with a CEO's performance, they are most likely to:


A) buy more shares in an effort to gain control of the firm.
B) file a shareholder resolution.
C) replace the CEO through a grassroots shareholder uprising.
D) sell their shares.

Correct Answer

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Which of the following organization forms for a business in the U.S.does NOT avoid double taxation?


A) Partnership
B) "C" corporation
C) "S" corporation
D) Limited Partnership

Correct Answer

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The most senior financial manager in a corporation is usually called:


A) the chief executive officer.
B) the chief financial officer.
C) the chief operating officer.
D) the chairman of the board.

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An investment is said to be liquid if the investment:


A) has large day to day fluctuations in price.
B) has a large bid-ask spread.
C) can easily be converted into cash.
D) is traded on a stock exchange.

Correct Answer

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Which of the following organization forms accounts for the most revenue?


A) Sole proprietorship
B) Partnership
C) "Corporation
D) Limited Partnership

Correct Answer

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Use the table for the question(s) below. Consider the following two quotes for XYZ shares: Use the table for the question(s) below. Consider the following two quotes for XYZ shares: -The largest stock market in the world is: A) the London Stock Exchange. B) NASDAQ. C) the American Stock Exchange. D) the New York Stock Exchange. -The largest stock market in the world is:


A) the London Stock Exchange.
B) NASDAQ.
C) the American Stock Exchange.
D) the New York Stock Exchange.

Correct Answer

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