FIN 419 ASSIST Perfect Education/fin419assist.cofi FIN 419 ASSIST Perfect Education/fin419assist.cofi | Page 8

3. Holders of equity have claims on both income and assets that are
secondary to the claims of creditors.
4. The possibility that the issuer of a bond will not pay the
contractual interest or principal payments as scheduled is called
maturity risk.
5. The breakeven point in dollars can be computed by dividing the
contribution margin into the fixed operating costs.
Multiple-choice (1point each)
6. The ________ is the extent of an asset's risk. It is found by
subtracting the pessimistic outcome from the optimistic outcome
7. ________ measure(s) the risk of a capital budgeting project by
estimating the NPVs associated with the optimistic, most likely, and
pessimistic cash flow estimates
8. If a firm uses an aggressive financing strategy,