Exam 31: Financial Management in Not for Profit Businesses

The primary goal of investor-owned firms is shareholder wealth maximization, while the primary goal of not-for-profit firms is typically stated in terms of some mission; for example, to provide health care services to the communities served.

Which of the following statements about municipal bond financing is most correct?

Not-for-profit firms have fund capital in place of equity capital. Since fund capital does not have to provide a return to stockholders, the appropriate cost of fund capital in a cost of capital estimate is zero.

The net present social value model formally recognizes that not-for-profit firms must consider the social value along with the financial value of proposed new projects.

Which of the following statements about project risk analysis in not-for-profit firms is incorrect?

Which of the following statements about a not-for-profit firm's cost of capital estimate is most correct?

Which of the following statements about a not-for-profit firm's ownership is most correct?

Which of the following statements about a not-for-profit firm's sources of capital is most correct?

Which of the following statements about a not-for-profit firm's fund capital is most correct?

Since not-for-profit firms do not pay taxes, they receive no tax benefits whatsoever from using debt financing.