24 May Question 10AMERICAN UNIVERSITY IN BULGARIA
Question
10AMERICAN UNIVERSITY IN BULGARIA
BUS 306:CORPORATE FINANCE I
SPRING 2011, AUBG
MIDTERM EXAM 1
Name: ___________________________________ ID _________
Version 1 Solution Guide
INSTRUCTIONS:
1. You have 90 minutes to complete the exam.
2. The exam is worth a total of 100 points.
3. You may use a calculator and scratch paper sheets. You must hand in the sheets with
your exam (put your name on it).
4. Allocate your time wisely. Use the number of points assigned to each problem as your
guide.
5. In order to get full credit on the problems, you must show ALL your work!
6. You can get partial credits if you show your calculations or provide arguments to
support your answer.
7. No credits will be warded if you fail to state your assumptions or conclusions
explicitly.
1
Part A: Multiple choice questions (2.5 points each, 15 points in total):
1. Which of the following statements is CORRECT?
a. One of the disadvantages of a sole proprietorship is that the proprietor is exposed to
unlimited liability.
b. It is generally easier to transfer one’s ownership interest in a partnership than in a
corporation.
c. One of the advantages of the corporate form of organization is that it avoids double
taxation.
d. One of the advantages of a corporation from a social standpoint is that every
stockholder has equal voting rights, i.e., “one person, one vote.”
e. Corporations of all types are subject to the corporate and personal income tax.
2. Which of the following statements is CORRECT?
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