Unused capital budget funds are assumed to earn the same rate of return as the average cost of capital for the firm. In other words they may be invested in $0.0 NPV projects. (Or, alternatively, excess funds may be returned to creditors and shareholders.) Indicate whether the statement is true or false. ANSWER […]
Date: September 19th, 2020
On a practical basis a, manager should always accept all positive NPV projects even if this means exceeding a limited budget. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: On a practical basis, a manager should accept the combination of positive NPV projects that maximizes the total NPV while […]
Date: September 19th, 2020
An increase in fixed operating and financial cost results in an increase in risk, since the firm will have to achieve a higher level of sales just to break even. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
If a firm’s sales are constant, its investment in operating assets should also be constant, and the firm will have only a permanent funding requirement. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
With an unlimited amount of funds, a firm could accept all positive NPV projects. However, with limited budgets, managers are forced to accept some positive NPV projects while rejecting others. What overall financial rule should managers follow when choosing the portfolio of projects to accept? Why? What will be an ideal response? ANSWER […]
Date: September 19th, 2020
Using beta as a risk measurement device has not caught on in the real world because finding the value is nearly impossible for most investors. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Most online investment information sources provide estimates of beta for publicly traded securities; e.g. finance.yahoo.com.
Date: September 19th, 2020
One of the functions of a finance manager is ________. A) to forecast for the coming period B) to forecast for the present period C) to forecast for the past period D) to forecast for the present and future periods ANSWER Answer: A
Date: September 19th, 2020
The best rule for choosing projects when a firm has a limited amount of funds is to accept the group of projects with the greatest combined ________. A) number of projects B) IRR C) NPV D) time to completion ANSWER Answer: C
Date: September 19th, 2020
The cost of equity is greater than the cost of debt and increases with increasing financial leverage, but generally less rapidly than the cost of debt. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
In general, a subjective assessment of betas and projects is preferred to the pure play approach. Indicate whether the statement is true or false.c ANSWER Answer: FALSE Explanation: In general, a pure play approach to assigning betas to projects is preferred to a subjective assessment.
Date: September 19th, 2020
