Exam 1: Introduction to Finance for Entrepreneurs

Lindsey and Tobias have the opportunity to invest in a project that requires an investment of $3,000. There is a 35% chance of a $2,900 return; a 40% chance of a $3,400 return; and a 25% chance of a $4,500 return one year from now. Lindsey requires a 15% return on the project after the first year, but Tobias requires a return of only 12%. Using the expected rate of return:

Perhaps the most important invention shuttling us from an industrial society to an information society is the computer chip.

The second stage in a successful venture's life cycle is the startup stage.

Phillips and Kirchhoff, using Dun & Bradstreet data, found that 24 percent of new firms were still in existence after two years of operation.

Free cash flows are adjusted for risk and the time value of money when used to calculate the value of a venture.

Which of the following does not describe activity during the venture's life cycle startup stage?

You have the opportunity of making a $5,000 investment. The outcomes one year from now will be either $4,500 or $6,000 with an equal chance of either outcome occurring. What is the expected outcome?

Which one of the following possible conflicts of interest increases in divergence at venture gets close to bankruptcy?

Early-stage ventures include firms in their development, startup, orsurvival live cycle stages.

Small businesses, those with less than 500 employees, represent over 99 percent of all employers, and account for about one-half of the gross domestic product in the United States.

Which one of the following possible conflicts of interest is usually minimized through the use of equity incentives?

The owner-debtholder conflict is the divergence of the owners' and lenders' self-interest as the firm gets close to going "public."

Studies by Phillips and Kirchhoff, and by Headd, found that one-half of new firms or new employers were still in existence after four years of operation.

One study of successful entrepreneurs indicated that a majority felt that the most important factor in the long-term success of their ventures was:

"Crises and bubbles" and "emerging economies and global change" are considered to be sources of entrepreneurial opportunities.

Which of the following is not a life cycle stage of a successful venture?

Successful entrepreneurs exhibit which of the following traits?

Founder and venture investor shares are sold to the public after the initial offering to the public is called?

The "sharing economy" refers to the cross-referencing of innovations for record-keeping purposes.

You are considering investing in two independent projects "A" and "B". Project A requires an initial investment of $12,000. In one year, there is a 30% chance of a $10,500 return; a 50% chance of a $12,500 return; and a 20% chance of a $14,500 return. Project B requires an initial investment of $1,000. In one year, there is a 25% chance of a $950 return; a 25% chance of a $1,000 return; and a 50% chance of a $1,200 return. If you require a 7% return on your investment after one year, you should: