finc620 week 2 quiz
| Assume a project has normal cash flows. All else equal, which of the following statements is CORRECT? | ||||
· Question 2
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Masulis Inc. is considering a project that has the following cash flow and WACC data. What is the project’s discounted payback?
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· Question 3
2 out of 2 points
| Which of the following statements is CORRECT? | ||||
· Question 4
2 out of 2 points
| Which of the following statements is CORRECT? | ||||
· Question 5
2 out of 2 points
| The relative risk of a proposed project is best accounted for by which of the following procedures? | ||||
· Question 6
2 out of 2 points
| Which of the following statements is CORRECT? | ||||
· Question 7
2 out of 2 points
| Currently, Powell Products has a beta of 1.0, and its sales and profits are positively correlated with the overall economy. The company estimates that a proposed new project would have a higher standard deviation and coefficient of variation than an average company project. 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. On the basis of this information, which of the following statements is CORRECT? |
· Question 8
2 out of 2 points
| Which of the following statements is CORRECT? | ||||
· Question 9
2 out of 2 points
Ehrmann Data Systems is considering a project that has the following cash flow and WACC data. What is the project’s MIRR? Note that a project’s MIRR can be less than the WACC (and even negative), in which case it will be rejected.
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· Question 10
2 out of 2 points
| Which of the following statements is CORRECT? | ||||
· Question 11
0 out of 2 points
| Which of the following statements is CORRECT? | ||||
· Question 12
2 out of 2 points
| Projects S and L both have normal cash flows, and the projects have the same risk, hence both are evaluated with the same WACC, 10%. However, S has a higher IRR than L. Which of the following statements is CORRECT? | ||||
· Question 13
2 out of 2 points
| 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. Which of the followingindependent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects? | ||||
· Question 14
2 out of 2 points
| Which of the following is NOT a relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project? | ||||
· Question 15
2 out of 2 points
| 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%. 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. However, you believe that the economy will soon fall into a mild recession, and money costs and thus your WACC will soon decline. 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. Under these conditions, which of the following statements is CORRECT? |
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