mid test business finance

your company want to discontinued a product, these information are available:

Fixed manufacturing overhead costs: $50,000 (allocated to the product line and unavoidable even if the product line is discontinued), variable costs per unit: $15, Selling price per unit: $25, Units sold annually: 10,000, Historical research and development cost $10.000 (already spent and can not be recovered).

which information is irrelevant (will not affect) the decision?

• manufacturing overhead

• variable cost

• historical research and development cost

• selling price

If an investor want to obtain an additional working capital, she does not want to commit paying a certain amount regularly. However, she is willing to do a profit sharing in the form of dividen. what capital funding types that you will suggest her?

• bank borrowing

• shareholders' capital

in the investment, there is a rule of tumbs, in which, high risk of investment will yeald ...... (higher / lower) return.

this theory is explaining the potential asymetric of information, in which, agent (management) that normally has to improve shareholder's value, in a certain condition, the agent will not deliver all information to shareholders to maximize their value. what theory is this?

• stewardship theory

• agency theory

• upper echelons theory

mr Agus wants to offer his franchise business in the KONTAN newspaper. The reader of the newspaper is unsophisticated investor, with low education background, doesnot understand time value of money, but potentially have a lot of money. which investment tools that Mr Agus must offer in the newspaper advertisement?

• break event analysis

• NPV

• IRR

If the risk free rate is 5%, risk premium 2%, an investment yield at 4.5%. That 4.5% is 1,5% higher than deposito (bank). Is the investment profitable?

• yes, it is higher than deposito.

• yes, it is higher than risk premium.

• no, it is lower than risk free rate.

• no, it is higher than risk premium and lower than deposito.

financing method affect the shareholder's wealth.

• TRUE

• FALSE

An investment required cost of capital of 50 million rupiah. The time duration will be 5 years, with return of 15.000.000 per year, discounted at 14%. With NPV or IRR analysis, will you recommend to take the investment?

• no

• yes

An investment with cost of capital 40 million rupiah. it's return will be 10 million in the first year, and will be increased by 10% per year, until year 5, discounted at 15%. In the year 5, the business will give back the 40 million to the investor. Assume the investor is you. will you take the investment?

• yes

• no.

The special characteristic of limited liability is when the company's bankcrupt (liability is more than the asset), the shareholders are not obligated to pay any loss occured.

• true

• false