Test Bank for Fundamentals of Corporate Finance, 4th Edition

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1Fundamentals of Corporate Finance, 4e(Berk/DeMarzo/Harford)Chapter 1Corporate Finance and the Financial Manager1.1Why Study Finance?1) The Valuation Principle shows how to make the costs and benefits of a decision comparable so that wecan evaluate them properly.Answer: TRUEDiff: 1Var: 1Skill: ConceptualAACSB Objective: Analytic SkillsAuthor: DSQuestion Status: Previous Edition2) Financial decisions require that you weigh alternatives in strictly monetary terms.Answer: FALSEDiff: 1Var: 1Skill: ConceptualAACSB Objective: Analytic SkillsAuthor: DSQuestion Status: Revised3) Which of the following best describes why the Valuation Principle is a key concept in making financialdecisions?A) It shows how to assign monetary value to intangibles such as good health and well-being.B) It allows fixed assets and liquid assets to be valued correctly.C) It gives a good indication of the net worth of a person, item, or company and can be used to estimateany changes in that net worth.D) It shows how to make the costs and benefits of a decision comparable so that we can weigh themproperly.Answer: DDiff: 1Var: 1Skill: ConceptualAACSB Objective: Analytic SkillsAuthor: DSQuestion Status: Previous Edition1.2The Four Types of Firms1) Partnerships are the most common type of business firm in the world.Answer: FALSEDiff: 1Var: 1Skill: ConceptualAACSB Objective: Analytic SkillsAuthor: DSQuestion Status: Revised

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