Finance 534 week 7 quiz 6\t\u00a0\tQuestion 1\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\tAnswer \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 2\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 3\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Assume that the economy is in a mild recession, and as a result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%.\u00a0 Project S has an IRR of 20% while Project L’s IRR is 15%. The projects have the same NPV at the 8% current WACC.\u00a0 However, you believe that the economy is about to recover, and money costs and thus your WACC will also increase.\u00a0 You also think that the projects will not be funded until the WACC has increased, and their cash flows will not be affected by the change in economic conditions.\u00a0 Under these conditions, which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 4\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Four of the following statements are truly disadvantages of the regular payback method, but one is not a disadvantage of this method.\u00a0 Which one is NOT\ta disadvantage of the payback method?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 5\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 6\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\u00a0 Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 7\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 8\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 9\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 10\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\u00a0 Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 11\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0Question 12\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\u00a0 Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 13\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatively high. The WACC for two mutually exclusive projects that are being considered is 12%.\u00a0 Project S has an IRR of 20% while Project L’s IRR is 15%. The projects have the same NPV at the 12% current WACC.\u00a0 However, you believe that the economy will soon fall into a mild recession, and money costs and thus your WACC will soon decline.\u00a0 You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions.\u00a0 Under these conditions, which of the following statements is CORRECT?\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 14\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 15\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd\u00a0\t\u00a0Question 16\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 The relative risk of a proposed project is best accounted for by which of the following procedures?\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 17\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0\t\u00a0Question 18\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Rowell Company spent $3 million two years ago to build a plant for a new product.\u00a0 It then decided not to go forward with the project, so the building is available for sale or for a new product.\u00a0 Rowell owns the building free and clear–there is no mortgage on it.\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0\t\u00a0Question 19\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following should be considered when a company estimates the cash flows used to analyze a proposed project?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0Question 20\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 21\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 A company is considering a new project.\u00a0 The CFO plans to calculate the project’s NPV by estimating the relevant cash flows for each year of the project’s life (i.e., the initial investment cost, the annual operating cash flows, and the terminal cash flow), then discounting those cash flows at the company’s overall WACC.\u00a0 Which one of the following factors should the CFO be sure to INCLUDE in the cash flows when estimating the relevant cash flows?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 22\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following factors should be included in the cash flows used to estimate a project’s NPV?\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0Question 23\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following rules is CORRECT for capital budgeting analysis?\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0Question 24\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Currently, Powell Products has a beta of 1.0, and its sales and profits are positively correlated with the overall economy.\u00a0 The company estimates that a proposed new project would have a higher standard deviation and coefficient of variation than an average company project.\u00a0 Also, the new project’s sales would be countercyclical in the sense that they would be high when the overall economy is down and low when the overall economy is strong.\u00a0 On the basis of this information, which of the following statements is CORRECT?\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 25\t2 out of 2 points\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following statements is CORRECT?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t\u00a0Question 26\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following procedures does the text say is used most frequently by businesses when they do capital budgeting analyses?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0\t\u00a0Question 27\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 A firm is considering a new project whose risk is greater than the risk of the firm’s average project, based on all methods for assessing risk.\u00a0 In evaluating this project, it would be reasonable for management to do which of the following?\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\t \ufffd \ufffd\u00a0\t\u00a0Question 28\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:\t \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\t\u00a0Question 29\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Which of the following is NOT a relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project?\t\u00a0\t\u00a0Question 30\t\u00a0\t \ufffd \ufffd\u00a0\t \ufffd \ufffd\u00a0 Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects.\u00a0 Which of the following independent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects?<\/p>\n","protected":false},"excerpt":{"rendered":"
Finance 534 week 7 quiz 6 \u00a0 Question 1 \u00a0 \ufffd \ufffd\u00a0 \ufffd \ufffd\u00a0 Which of the following statements is CORRECT? Answer \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \u00a0Question 2 \u00a0 \ufffd \ufffd\u00a0 Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-216863","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216863","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=216863"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/216863\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=216863"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=216863"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=216863"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}