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A. _involve damage done by outside forces such as natural disasters, theft, and lawsuits. Hazard risks Financial risks C. Operational risks Strategic risks D. is the process by which firms reduce exposure to price or rate fluctuations. Arbitrary Hedging Leverage None of the above A. 8. A is a contract where two parties agree on the price of an asset today to be delivered and paid for at some future date. Forward contract Option contract C. Future contract Both A and C D. Both is the exchange rate for an immediate trade. is the exchange rate specified in the forward contract. Current rate, forward rate Current rate, future rate Spot rate, future rate D. Spot rate, forward rate 10. Financial risks arise from such things as: Adverse exchange rate changes Commodity price fluctuations Interest rate movements All of the above 11. What is/are the primary goal/s of financial managers? Maximize stockholder's wealth B. Maximize profit Minimizing the WACC Both A and C 12. The effect of financial leverage depends on the company's EBIT. When EBIT is relatively leverage is beneficial. High Low Stable D. Violate B. C. 13. Because of the impact that financial leverage has on both the expected return to stockholders and the riskiness of the stock, capital structure is an important consideration. A. True B. False 14. There are two major methods for determining the cost of equity. They are: A. Dividend growth model and CAPM B. SML and CAPM Cost of equity, CAPM Dividend growth model, Cost of equity D. 15. The cost of debt is: A. The required return on our company's debt B. Best estimated by computing the yield-to- maturity on the existing debt C. NOT the coupon rate D. All the above

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