Question 1

As the number of stocks in a portfolio increases, unsystematic risk

Options :

A : decreases and systematic risk decreases

B : increases, and systematic risk increases

C : decreases and systematic risk does not change

D : increases, and systematic risk does not change

Answer: C

Question 2

L&H Sports owns and operates several stadiums used for baseball and soccer games Management is considering installing machines that would be used to roast peanuts on the premises. This equipment would allow L&H to sell freshly roasted peanuts rather than the pre-roasted peanuts that are currently sold Marketing studies suggest that this feature would increase peanut sales. The roasters can be purchased in several sizes, and the annual rental fees and operating costs vary with the size of the roaster Information about the roasters is shown below.

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L&H currently sells pre-roasted peanuts for $0 60 pet bag. Management plans to sell the freshly roasted peanuts for a higher price but at no more than a 10% increase. The demand for freshly roasted peanuts is estimated to be 250, 000 bags pet year. Which roaster should L&H purchase to maximize its profit?

Options :

A : Economy

B : Regular

C : Super

Answer: B

Question 3

Southwest Supplies Inc. (SSI) is considering the following two projects with cash-flows discounted at SSI's weighted average cost of capital.

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SSI can only afford to invest in one of the projects. Which statement would most likely explain why SSI would choose Project B over project A?

Options :

A : Project B results in a higher cumulative accounting income

B : Project B generates significantly more non-cash expenses

C : Project B cash-flows are relatively more certain

D : Project B cash-flows are to be received sooner

Answer: D

Question 4

Which one or the following costs Is a variable product cost?

Options :

A : Office rent in a temporary staffing company

B : Plant manager s salary for a computer chip manufacturer

C : Payroll taxes based on the hourly wages of plant personnel

D : Promotional materials distributed to raise brand awareness

Answer: C

Question 5

Which one of the following situations describes a secondary offering of stock by a company?

Options :

A : The company has an initial public offering of its stock and its investment bank needs to add mote shares to the initial public offering to meet excess demand by investors

B : After the lockup period of the initial public offering ends, the company 3 founders sell some of their shares to the public

C : The company repurchases shares of its stock in the open market, but it then later sells these shares in the open market

D : After completing its initial public offering, the company sells more new shares of its stock

Answer: B