,TESTBANK for Finance for Executives Managing for
Value Creation, 7th Edition Gabriel Hawawini
Notes
1- The file is chapter after chapter.
2- We have shown you 10 pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Chapter 1 – Financial Management and Value Creation: An Overview
1. Which of the following statements is correct in relation to how a venture is financed?
a. The venture will be financed by its shareholders and by the debt holders. Cash
contributed by shareholders is called debt capital, while cash contributed by
lenders is equity capital.
b. The venture will be financed by its shareholders and by the debt holders. Cash
contributed by shareholders is called equity capital, while cash contributed by
lenders is called debt capital.
c. The venture will be financed only by its shareholders, through cash and profits.
These sources of funds are called equity capital.
d. The venture will be financed by its shareholders and by the debt holders. Profits
contributed by shareholders are called equity capital, while cash contributed by
lenders is called debt capital
Answer: B
2. The management main objective is to:
a. create value for employees, customers and suppliers.
b. create value of the community.
c. create value for the firm’s owners.
d. create value for the government.
Answer: C
3. Which of the following statements is correct?
a. The firm’s shareholders invested cash in the firm and are interested in cash
returns, while the debt holders invested cash in the firm and are interested in
cash returns.
b. The firm’s shareholders invested cash in the firm and are interested in profit
returns, while the debt holders invested cash in the firm and are interested in
profit returns.
c. The firm’s shareholders invested cash in the firm and are interested in cash
returns, while the debt holders invested cash in the firm and are interested in
profit returns.
d. The firm’s shareholders invested cash in the firm and are interested in profit
returns, while the debt holders invested cash in the firm and are interested in
cash returns.
Answer: A
For use with Finance for Executives: Managing for Value Creation, 7th edition
by Gabriel Hawawini and Claude Viallet, ISBN 9781473778917
© 2022 Cengage Learning EMEA
, 4. A discount rate used to calculate the NPV of a project is:
a. the cost of financing the proposal.
b. the weighted average of the project’s cost of equity and its after-tax cost of debt.
c. the weighted average cost of capital.
d. all of the above.
Answer: D
5. A project should be undertaken only if it does not destroy value. Under which
circumstance should a project be accepted?
a. NPV is zero.
b. NPV is negative.
c. NPV is positive.
d. NPV is positive or zero.
Answer: D
6. A project should be undertaken only if it does not destroy value. Under which
circumstance should a project be accepted?
a. The IRR is higher than the cost of capital.
b. The IRR is equal to the cost of capital.
c. The IRR is higher or equal to the cost of capital.
d. The IRR is lower than the cost of capital.
Answer: C
7. NPV proposals are expected to create entry barriers that are costly enough to discourage
potential competitors, but not so costly as to wipe out a firm’s own positive NPV. Which
of the following is not one of these entry barriers?
a. Patents and trademarks
b. A unique distribution channel
c. Innovative products
d. All of the above
Answer: D
For use with Finance for Executives: Managing for Value Creation, 7th edition
by Gabriel Hawawini and Claude Viallet, ISBN 9781473778917
© 2022 Cengage Learning EMEA
Value Creation, 7th Edition Gabriel Hawawini
Notes
1- The file is chapter after chapter.
2- We have shown you 10 pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
,Chapter 1 – Financial Management and Value Creation: An Overview
1. Which of the following statements is correct in relation to how a venture is financed?
a. The venture will be financed by its shareholders and by the debt holders. Cash
contributed by shareholders is called debt capital, while cash contributed by
lenders is equity capital.
b. The venture will be financed by its shareholders and by the debt holders. Cash
contributed by shareholders is called equity capital, while cash contributed by
lenders is called debt capital.
c. The venture will be financed only by its shareholders, through cash and profits.
These sources of funds are called equity capital.
d. The venture will be financed by its shareholders and by the debt holders. Profits
contributed by shareholders are called equity capital, while cash contributed by
lenders is called debt capital
Answer: B
2. The management main objective is to:
a. create value for employees, customers and suppliers.
b. create value of the community.
c. create value for the firm’s owners.
d. create value for the government.
Answer: C
3. Which of the following statements is correct?
a. The firm’s shareholders invested cash in the firm and are interested in cash
returns, while the debt holders invested cash in the firm and are interested in
cash returns.
b. The firm’s shareholders invested cash in the firm and are interested in profit
returns, while the debt holders invested cash in the firm and are interested in
profit returns.
c. The firm’s shareholders invested cash in the firm and are interested in cash
returns, while the debt holders invested cash in the firm and are interested in
profit returns.
d. The firm’s shareholders invested cash in the firm and are interested in profit
returns, while the debt holders invested cash in the firm and are interested in
cash returns.
Answer: A
For use with Finance for Executives: Managing for Value Creation, 7th edition
by Gabriel Hawawini and Claude Viallet, ISBN 9781473778917
© 2022 Cengage Learning EMEA
, 4. A discount rate used to calculate the NPV of a project is:
a. the cost of financing the proposal.
b. the weighted average of the project’s cost of equity and its after-tax cost of debt.
c. the weighted average cost of capital.
d. all of the above.
Answer: D
5. A project should be undertaken only if it does not destroy value. Under which
circumstance should a project be accepted?
a. NPV is zero.
b. NPV is negative.
c. NPV is positive.
d. NPV is positive or zero.
Answer: D
6. A project should be undertaken only if it does not destroy value. Under which
circumstance should a project be accepted?
a. The IRR is higher than the cost of capital.
b. The IRR is equal to the cost of capital.
c. The IRR is higher or equal to the cost of capital.
d. The IRR is lower than the cost of capital.
Answer: C
7. NPV proposals are expected to create entry barriers that are costly enough to discourage
potential competitors, but not so costly as to wipe out a firm’s own positive NPV. Which
of the following is not one of these entry barriers?
a. Patents and trademarks
b. A unique distribution channel
c. Innovative products
d. All of the above
Answer: D
For use with Finance for Executives: Managing for Value Creation, 7th edition
by Gabriel Hawawini and Claude Viallet, ISBN 9781473778917
© 2022 Cengage Learning EMEA
