Intermediate Financial Mgmt

fin_3950_exam_1_p2.docx

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Finance 3950 Spring 2016

Exam 1 – Part 2

Name: Replace this text with your name

Choose 4 of the following 5 questions. Each question carries a value of 10 points. If you choose to answer all five, I will grade the first four. Follow the sentence guidelines – remember MORE IS NOT ALWAYS BETTER, SOMETIMES IT’S JUST MORE. Feel free to simply type your answers between each of the questions you choose to answer. Submit to the D2L Dropbox no later than Wednesday March 16th.

1. Discuss the concept of capital constraints with respect to capital budgeting. What is their effect on capital budgeting decisions? What is the difference between soft and hard rationing? (8 sentence maximum)

2. Briefly explain the acronym MACRS. What is its benefits or detriments to the firm? (4 sentence maximum)

3. Define the term cash flow for a project.

4. Define the term economic value added (EVA). (2 sentence maximum)

5. Define the agency problem. What is its negative result on the firm? Discuss how stock options can be used to reduce the agency problem. (5 sentence maximum).