Question 1

In the principal-agent framework,the ultimate principals are:
i.managers; II)board of directors; III)shareholders; IV)governments

Accepted Answer

A) I and II only 
B) IV only 
C) III only 
D) I,II,and III only 
A) I and II only 
B) IV only 
C) III only 
D) I,II,and III only

Question 2

The following are agency problems in capital budgeting except:

Accepted Answer

A) empire building. 
B) entrenching investments. 
C) avoiding risks. 
D) accepting all positive NPV projects. 
A) empire building. 
B) entrenching investments. 
C) avoiding risks. 
D) accepting all positive NPV projects.

Question 3

The free-rider problem,when referring to monitoring of the firms' performance,often results in:
I.ineffective monitoring by the shareholders;
II.monitoring being delegated by shareholders to boards of directors;
III.no monitoring by a large number of small individual investors

Accepted Answer

A) I only 
B) II only 
C) III only 
D) I,II,and III 
A) I only 
B) II only 
C) III only 
D) I,II,and III

Question 4

Since monitoring is not perfect,compensation plans should primarily provide managers incentives to:

Accepted Answer

A) put a lot of thought into their work. 
B) work long hours. 
C) take actions that make stakeholders happy. 
D) maximize the value of the firm to the shareholders. 
A) put a lot of thought into their work. 
B) work long hours. 
C) take actions that make stakeholders happy. 
D) maximize the value of the firm to the shareholders.

Question 5

Which of the following is NOT an advantage to calculating and reporting economic depreciation?

Accepted Answer

A) Most firms can easily calculate economic depreciation. 
B) Economic depreciation is generally more realistic than accounting depreciation. 
C) Economic depreciation enables a firm to understand the true value of its assets. 
D) All of the options are advantages to calculating and reporting economic depreciation. 
A) Most firms can easily calculate economic depreciation. 
B) Economic depreciation is generally more realistic than accounting depreciation. 
C) Economic depreciation enables a firm to understand the true value of its assets. 
D) All of the options are advantages to calculating and reporting economic depreciation.

Question 6

Agency problems in capital budgeting include: reduced effort,perks,empire building,and entrenching investments.

Accepted Answer

A) True 
 B)False

Question 7

The following are disadvantages of using EVA as a performance measure EXCEPT:

Accepted Answer

A) EVA does not measure present values. 
B) EVA rewards the choice of projects with quick paybacks and penalizes projects with longer payback periods. 
C) EVA reduces explicit monitoring by top management. 
D) EVA is difficult to apply to start-up ventures. 
A) EVA does not measure present values. 
B) EVA rewards the choice of projects with quick paybacks and penalizes projects with longer payback periods. 
C) EVA reduces explicit monitoring by top management. 
D) EVA is difficult to apply to start-up ventures.

In the principal-agent framework,the ultimate principals are: i.managers; II)board of directors; III)shareholders; IV)governments

The following are agency problems in capital budgeting except:

The free-rider problem,when referring to monitoring of the firms' performance,often results in: I.ineffective monitoring by the shareholders; II.monitoring being delegated by shareholders to boards of directors; III.no monitoring by a large number of small individual investors

Since monitoring is not perfect,compensation plans should primarily provide managers incentives to:

Which of the following is NOT an advantage to calculating and reporting economic depreciation?

Agency problems in capital budgeting include: reduced effort,perks,empire building,and entrenching investments.

The following are disadvantages of using EVA as a performance measure EXCEPT:

Introduction to Corporate Finance

How to Calculate Present Values

Valuing Bonds

The Value of Common Stocks

Net Present Value and Other Investment Criteria

Making Investment Decisions With the Net Present Value Rule

Introduction to Risk and Return

Portfolio Theory and the Capital Asset Pricing Model

Risk and the Cost of Capital

Project Analysis

Investment, Strategy, and Economic Rents

Efficient Markets and Behavioral Finance

An Overview of Corporate Financing

How Corporations Issue Securities

Payout Policy

Does Debt Policy Matter

How Much Should a Corporation Borrow

Financing and Valuation

Understanding Options

Valuing Options

Real Options

Credit Risk and the Value of Corporate Debt

The Many Different Kinds of Debt

Leasing

Managing Risk

Managing International Risks

Financial Analysis

Financial Planning

Working Capital Management

Mergers

Corporate Restructuring

Governance and Corporate Control Around the World

Filters

Exam 12: Agency Problems, Compensation, and Performance Measurement

In the principal-agent framework,the ultimate principals are: i.managers; II)board of directors; III)shareholders; IV)governments

The following are agency problems in capital budgeting except:

The free-rider problem,when referring to monitoring of the firms' performance,often results in: I.ineffective monitoring by the shareholders; II.monitoring being delegated by shareholders to boards of directors; III.no monitoring by a large number of small individual investors

Since monitoring is not perfect,compensation plans should primarily provide managers incentives to:

Which of the following is NOT an advantage to calculating and reporting economic depreciation?

Agency problems in capital budgeting include: reduced effort,perks,empire building,and entrenching investments.

The following are disadvantages of using EVA as a performance measure EXCEPT:

Introduction to Corporate Finance

How to Calculate Present Values

Valuing Bonds

The Value of Common Stocks

Net Present Value and Other Investment Criteria

Making Investment Decisions With the Net Present Value Rule

Introduction to Risk and Return

Portfolio Theory and the Capital Asset Pricing Model

Risk and the Cost of Capital

Project Analysis

Investment, Strategy, and Economic Rents

Efficient Markets and Behavioral Finance

An Overview of Corporate Financing

How Corporations Issue Securities

Payout Policy

Does Debt Policy Matter

How Much Should a Corporation Borrow

Financing and Valuation

Understanding Options

Valuing Options

Real Options

Credit Risk and the Value of Corporate Debt

The Many Different Kinds of Debt

Leasing

Managing Risk

Managing International Risks

Financial Analysis

Financial Planning

Working Capital Management

Mergers

Corporate Restructuring

Governance and Corporate Control Around the World

Filters