1) An investor’s risky portfolio is made up of individual stocks. Which of the following statements about this portfolio is true?
A. Each stock in the portfolio has its own beta. 
B. Selling any stock in this portfolio will lower the beta of the portfolio. 
C. An investor cannot change the risk of this portfolio by her choice about personal leverage. 
D. Each stock in the portfolio will have a beta greater than 1. 

2) An all-equity-financed firm would __________.
A. not pay any income taxes, because interest would exactly offset its taxable income. 
B. pay corporate income taxes, because it would have interest expense. 
C. not pay corporate income taxes, because it would have no interest expense. 
D. pay corporate income taxes if its taxable income is positive. 

3) If a firm wants to lower its weighted average cost of capital (WACC), one way to do so would be to
A. sell more common shares 
B. sell more bonds 
C. pay a cash dividend 
D. issue a stock dividend 

4) Boeing® is a world leader in commercial aircraft. In the face of competition, Boeing® often faces a critical __________ decision: whether to develop a new generation of passenger aircraft.
A. present value 
B. payback 
C. capital budgeting 
D. dividend 

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