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2. Relaxant Inc. operates as a partnership. Now the partners have decided to convert the business into a corporation. Which of the following statements is CORRECT? a. Relaxants shareholders (the ex-partners) will now be exposed to less liability. b. The company will probably be subject to fewer regulations and required disclosures. c. Assuming the firm is profitable, none of its income will be subject to federal income taxes. d. The firm's investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. e. The firm will find it more difficult to raise additional capital to support its growth./ 5. Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and managers? a. Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries. b. Change the corporation's formal documents to make it easier for outside investors to acquire a controlling interest in the firm through a hostile takeover. c. The percentage of the firm's stock that is held by institutional investors such as mutual funds, pension funds, and hedge funds rather than by small individual investors rises from 10% to 80%. d. For a firm that compensates managers with stock options, increase the time before options are vested, i.e., the time before options can be exercised and the shares that are received can be sold. e. All of the above. 6. Which of the following statements is CORRECT? a. A good goal for a firm's management is the maximization of expected EPS. b. Most business in the U.S. is conducted by corporations, and corporations' popularity results primarily from their favorable tax treatment. c. Conflicts can exist between stockholders and managers, but potential conflicts are reduced by the possibility of takeovers. d. Corporations and partnerships have an advantage over proprietorships because a proprietor is exposed to unlimited liability, but the liability of all investors in the other types of businesses is more limited. e. For a stock to be in equilibrium, its intrinsic value must be greater than the actual market price. 19. Suppose you are buying your first condo for $145,000, and you will make a $15,000 down payment. You have arranged to finance the remainder with a 30-year, monthly payment, amortized mortgage at a 6.5% nominal interest rate, with the first payment due in one month. What will your monthly payments be? a. $741.57 b. $780.60 c. $821.69 d. $862.77 e. $905.91 17. Everything else equal, which of the following conditions will result in the lowest present value of $100 to be received in three years? a. annual compounding b. quarterly compounding c. monthly compounding d. daily compounding

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