FIN 534 Quiz 2 Multiple Choice Questions

Aug 9th, 2016
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Question 1. Which of the following statements is CORRECT? Answer The primary difference between EVA and accounting net income is that when net income is calculated, a deduction is made to account for the cost of common equity, whereas EVA represents net income before deducting the cost of the equity capital the firm uses. MVA gives us an idea about how much value a firm's management has added during the last year. MVA stands for market value added, and it is defined as follows: MVA = (Shares outstanding)(Stock price) + Book value of common equity. EVA stands for economic value added, and it is defined as follows: EVA = EBIT(1 - T) - (Investor-supplied op. capital) x (A - T cost of capital). EVA gives us an idea about how much value a firm's management has added over the firm's life. 2. Which of the following statements is CORRECT? Answer All corporations other than non-profit corporations are subject to corporate income taxes, which are 15% for the lowest amounts of income a

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FIN 534 Quiz 2 Multiple Choice QuestionsQuestion1. Which of the following statements is CORRECT?AnswerThe primary difference between EVA and accounting net income is that when net income iscalculated, a deduction is made to account for the cost of common equity, whereas EVArepresents net income before deducting the cost of the equity capital the firm uses.MVA gives us an idea about how much value a firm's management has added during the lastyear.MVA stands for market value added, and it is defined as follows:MVA = (Shares outstanding)(Stock price) + Book value of common equity.EVA stands for economic value added, and it is defined as follows:EVA = EBIT(1 - T) - (Investor-supplied op. capital) x (A - T cost of capital).EVA gives us an idea about how much value a firm's management has added over the firm's life.2. Which of the following statements is CORRECT?AnswerAll corporations other than non-profit corporations are subject to corporate income taxes, whichare 15% for the lowest amounts of income and 35% for the highest amounts of income.The income of certain small corporations that qualify under the Tax Code is completely exemptfrom corporate income taxes. Thus, the federal government receives no tax revenue from thesebusinesses.All businesses, regardless of their legal form of organization, are taxed under the Business TaxProvisions of the Internal Revenue Code.Small businesses that qualify under the Tax Code can elect not to pay corporate taxes, but

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