1. Suppose that Fortunate Ventures, Inc.'s, common shares are currently selling for $23 a share with 7 million shares outstanding. The firm also has 12,000 bonds outstanding, which are selling at 96 percent of par. If Fortunate Ventures was considering an active change to its capital structure to have a D/E ratio of 0.5, which type of security (stock or bonds) would the firm need to sell to accomplish this, and how much would it have to sell? A. Stock; $44,698,000 B. Bonds; $68,980,000 C. Bonds; $54,325,000 D. Stock; $38,460,000

2. To minimize the burden of paying stable dividends, what two classes do some firms divide dividends into? A. Ordinary and extraordinary B. Extraordinary and residual C. Residual and special D. Special and ordinary

3. Which one of these assumptions is featured in the "perfect world" presumed by the Modigliani-Miller Theorem? A. Bankruptcy is possible B. Markets are inefficient C. Equity and debt carry the same risk premium D. No taxes

4. If a company has 5,000,000 shares outstanding that are valued at $8 per share, how many shares will be outstanding after the company performs a 3-for-1 stock split? A. 15,000,000 B. 10,000,000 C. 5,000,000 D. 1,650,000

5. In Baumol's model, what's the assumed starting level for cash? A. Net present value B. Compensating balance C. Replenishment D. Safety stock

6. What do financial managers use to help them plan for periods during the year in which their firm will either

generate large cash surpluses or cash deficits?

A. The Baumol model

B. The operating cycle

C. The cash budget

D. The Miller-Orr model