Question 1 of 10 1.0\/ 1.0 Points<\/p>\n
Using the company cost of capital to evaluate a project is:<\/p>\n
I) Always correct<\/p>\n
II) Always incorrect<\/p>\n
III) Correct for projects that are about as risky as the average of the firm’s other assets<\/p>\n
A.I only<\/p>\n
B.II only<\/p>\n
C.III only<\/p>\n
D.I and III only<\/p>\n
Question 2 of 10 1.0\/ 1.0 Points<\/p>\n
Which of the following type of projects has average risk?<\/p>\n
A. Speculation ventures<\/p>\n
B. New products<\/p>\n
C. Expansion of existing business<\/p>\n
D. Cost improvement<\/p>\n
Question 3 of 10 1.0\/ 1.0 Points<\/p>\n
The market value of Cable Company’s equity is $60 million, and the market value of its risk-free debt is $40 million. If the required rate of return on the equity is 15% and that on the debt is 5%, calculate the company’s cost of capital. (Assume no taxes.)<\/p>\n
A.15%<\/p>\n
B.10%<\/p>\n
C.11%<\/p>\n
D. None of the above<\/p>\n
Question 4 of 10 1.0\/ 1.0 Points<\/p>\n
The hurdle rate for capital budgeting decisions is:<\/p>\n
A.The cost of capital<\/p>\n
B.The cost of debt<\/p>\n
C.The cost of equity<\/p>\n
D.All of the above<\/p>\n
Question 5 of 10 1.0\/ 1.0 Points<\/p>\n
The market value of XYZ Corporation’s common stock is 40 million and the market value of the risk-free debt is 60 million. The beta of the company’s common stock is 0.8, and the expected market risk premium is 10%. If the Treasury bill rate is 6%, what is the firm’s cost of capital? (Assume no taxes.)<\/p>\n
A.9.2%<\/p>\n
B.14%<\/p>\n
C.8.1%<\/p>\n
D. None of the above<\/p>\n
Question 6 of 10 1.0\/ 1.0 Points<\/p>\n
On a graph with common stock returns on the Y- axis and market returns on the X-axis, the slope of the regression line represents the:<\/p>\n
A. Alpha<\/p>\n
B. Beta<\/p>\n
C. R-squared<\/p>\n
D. Adjusted beta<\/p>\n
Question 7 of 10 1.0\/ 1.0 Points<\/p>\n
Generally, postaudits are conducted for large projects:<\/p>\n
A. shortly after the completion of the project<\/p>\n
B. after several years after the completion of the project<\/p>\n
C. shortly after the project has begun to operate<\/p>\n
D. well before the start of the project<\/p>\n
Question 8 of 10 1.0\/ 1.0 Points<\/p>\n
You are given the following data for year-1.<\/p>\n
Revenue = $43;<\/p>\n
Total costs = $30;<\/p>\n
Depreciation = $3;<\/p>\n
Tax rate = 30%.<\/p>\n
Calculate the operating cash flow for the project for year-1.<\/p>\n
A.$7<\/p>\n
B.$10<\/p>\n
C.$13<\/p>\n
D. None of the above<\/p>\n
Question 9 of 10 1.0\/ 1.0 Points<\/p>\n
The following are drawbacks of sensitivity analysis except:<\/p>\n
A. it provides ambiguous results.<\/p>\n
B. underlying variables are likely to be interrelated.<\/p>\n
C. it provides additional information about the project that is useful.<\/p>\n
D. all of the above statements are drawbacks of sensitivity analysis.<\/p>\n
Question 10 of 10 1.0\/ 1.0 Points<\/p>\n
The accounting break-even point occurs when:<\/p>\n
A. the total revenue line cuts the fixed cost line<\/p>\n
B. the present value of inflows line cuts the present value of outflows line<\/p>\n
C. the total revenue line cuts the total cost line<\/p>\n
D. none of the above<\/p>\n","protected":false},"excerpt":{"rendered":"
Question 1 of 10 1.0\/ 1.0 Points Using the company cost of capital to evaluate a project is: I) Always correct II) Always incorrect III) Correct for projects that are about as risky as the average of the firm’s other 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-27604","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/27604","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=27604"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/27604\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=27604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=27604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=27604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}