Objective type questions on decision on investments, inventory and risk management.

1.  The average cost associated with each additional dollar of financing for investment projects is:

1. The incremental return.
2. The marginal cost of capital.
3. Risk-free rate.
4. Beta.

2.  A firm is conducting an analysis of trends over time and discovers that its inventory turnover has declined. This may be due to:

1. An increase in sales.
2. An increase in cost of goods sold.
3. An increase in inventory purchases.
4. A decrease in inventory purchases.

3.  Common stockholders are most concerned with:

1. The spread between the return generated on new investments and the investor's required rate of return.
2. The percentage of profits retained.
3. The size of the firm\'s beginning earnings per share.
4. The risk of the investment.

4.  If current market interest rates rise, what will happen to the value of outstanding bonds?

1. It will rise
2. It will fall
3. It will remain unchanged
4. There is no connection between current market interest rates and the value of outstanding bonds

5.  Investment risk is:

1. the probability of achieving a return greater than expected.
2. the probability of achieving a beta coefficient less than expected.
3. the probability of achieving a return less than expected.
4. the probability of achieving a standard deviation less than expected.