True / False ( 1point each )
1 . The sole proprietor has unlimited liability ; his or her total investment in the business , but not his or her personal assets , can be taken to satisfy creditors .
2 . Time-value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today .
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 , 9 . The two major sources of short-term financing are 10 . At the operating breakeven point , ________ equals zero .
Problems ( show your work ) ( 1 Point ) 11 . Xiao Li wishes to accumulate $ 50,000 by the end of 10 years by making equal annual end-of-year deposits over the next 10 years . If Xiao Li can earn 5 percent on her investments , how much must she deposit at the end of each year ?