1. A financial manager is considering two projects, A and B. A is expected to add $ 2
million to profits this year while B is expected to add $ 1 million to profits this year.
Which of the following statements is most correct? (Points : 1) The manager should
select project A because it maximizes profit. The manager should select the project that
maximizes long-term profits, not just one year of profits. The manager should select
project A or he is irrational. The manager should select the project that causes the
stock price to increase the most, which could be A or B.
2. All of the following business organizations provided limited liability to their owners
except: (Points : 1) General partnership S-type corporation Corporation Limited
liability corporation
3. Which of the following statements about depreciation is true? (Points : 1)
Depreciation is a noncash expense, but it is important because it affects a
corporation’s tax liability. Depreciation must be calculated the same way for financial
reporting and tax purposes. The choice of depreciation method had no impact on a firm’s
value because the same amount of depreciation is taken over the life of an asset
regardless of the method used. A shareholder wealth maximizing corporation prefers to
defer depreciation expense in order to increase current reported profits.
4. When a company repurchases its own common stock, it is likely that ______ (Points :
1) The stock price will increase because the company views the stock as undervalued
