Exam 1: Introduction to Finance for Entrepreneurs

Free cash exists when cash exceeds that which is needed to operate,pay creditors,and invest in assets.

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

A project requires an initial investment of $1,000,000.In one year,there is a 40% chance of a $950,000 return; a 50% chance of a $1,200,000 return; and a 10% chance of a $2,000,000 return.What is the project's expected return one year from now?

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:

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

Environmental commerce,or e-commerce,involves the use of electronic means to conduct business online.

Studies by Phillips and Kirchhoff,and by Headd,found that about 38%-40% of new firms survived six years of operation.

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

Free cash is all the cash available to cover operating expenses.

Business angels are wealthy individuals acting as informal or private investors,who provide venture financing for small businesses.

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

Which of the following advise and assist corporations on the type,timing,and costs of issuing new debt and equity securities and facilitate the sale of firms?

A study by Phillips and Kirchhoff using Dun & Bradstreet data found that about three-fourths of new firms were still in existence after two years of operation.

One principal of entrepreneurial finance is "risk and expected reward go hand in hand.

Mezzanine financing is associated with which one of the following life cycle stages:

Bill Gates once said: "I was seldom able to see an opportunity,until it ceased to be one."

Which of these statements is correct?

Mark Twain once said,"I was always able to see an opportunity before it became one."

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

In Chapter I five mega-trend categories are identified as sources of entrepreneurial opportunities.