In determining the appropriate discount rate for an individual project, the financial manager will be most influenced by the;A.expected value.;B.internal rate of return.;C.standard deviation.;D.coefficient of variation.;Question 2 of 25;4.0 Points;Which of the following is a characteristic of beta?;A.Beta measures only the volatility of returns on an individual bond relative to a bond market index.;B.A beta of 1.0 is of equal risk with the market.;C.A beta of greater than 1.0 has less risk than the market.;D.Two of the above are true.;uestion 3 of 25;4.0 Points;Capital rationing;A.is a way of preserving the assets of the firm over the long term.;B.is a less than optimal way to arrive at capital budgeting decisions.;C.assures stockholder wealth maximization.;D.assures maximum potential profitability.;Question 4 of 25;4.0 Points;Capital budgeting is only a concern of finance and accounting personnel.;A. True;B. False;Question 5 of 25;4.0 Points;Even though one project may have superior cash flows, top management may sometimes choose a project that inflates earnings instead of cash flow.;A. True;B. False;Question 6 of 25;4.0 Points;Simulation models allow the planner to;A.reduce the standard deviations of projects.;B.test possible changes in each variable.;C.deal with the uncertainty in forecasting outcome;D.b and c.;Question 7 of 25;4.0 Points;The selection of a mutually exclusive project means that all other projects with a positive net present value may also be selected.;A. True;B. False;Question 8 of 25;4.0 Points;The cost of capital is assumed to contain no risk for the firm.;A. True;B. False;Question 9 of 25;4.0 Points;If three investment alternatives all have some degree of risk and different expected returns, which of the following measures could best be used to rank the risk levels of the projects?;A.Coefficient of correlation;B.Coefficient of variation;C.Standard deviation of returns;D.Net present value;Question 10 of 25;4.0 Points;To find the exact internal rate of return for projects with uneven cash flows, we can interpolate between two present value annuity factors from Appendix D.;A. True;B. False;Question 11 of 25;4.0 Points;Projects with high positive correlation are sometimes valuable because they allow us to smooth out the overall performance of the firm during a business cycle.;A. True;B. False;Question 12 of 25;4.0 Points;Which of the following is a false statement?;A.Risky investments may produce large losses.;B.Risky investments may produce large gains.;C.The coefficient of variation is a risk measure.;D.Risk-averse investors cannot be induced to invest in risky assets.;uestion 13 of 25;4.0 Points;Regardless of risk, no projects should be accepted unless they earn more than the firm's weighted average cost of capital.;A. True;B. False;Question 14 of 25;4.0 Points;Cash flow can be said to equal;A.operating income less taxes plus depreciation.;B.operating income less taxes.;C.operating income before depreciation and taxes plus depreciation.;D.operating income after taxes minus depreciation.;Question 15 of 25;4.0 Points;There are several disadvantages to the payback method, among them;A.payback ignores the time value of money.;B.payback emphasizes receiving money back as fast as possible for reinvestment.;C.payback is Basic to use and to understand.;D.payback can be used in conjunction with time adjusted methods of evaluation.;uestion 16 of 25;4.0 Points;The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method;A.assumes that cash flows are reinvested at the project's internal rate of return.;B.concentrates on the liquidity aspects of investment projects.;C.assumes that cash flows are reinvested at the firm's weighted average cost of capital.;D.none of these.;Question 17 of 25;4.0 Points;As the cost of capital increases;A.fewer projects are accepted.;B.more projects are accepted.;C.project selection remains unchanged.;D.None of these.;Question 18 of 25;4.0 Points;The capital budgeting decisions of a firm will have no effect on the share price of the common stock.;A. True;B. False-;Question 19 of 25;4.0 Points;The payback method considers all cash inflows.;A. True;B. False;uestion 20 of 25;4.0 Points;Capital budgeting is primarily concerned with;A.capital formation in the economy.;B.planning future financing needs.;C.evaluating investment alternatives.;D.minimizing the cost of capital.;Question 21 of 25;4.0 Points;In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows.;A. True;B. False;uestion 22 of 25;4.0 Points;Which of the following statements about the "payback method" is true?;A.The payback method considers cash flows after the payback has been reached.;B.The payback method does not consider the time value of money.;C.The payback method uses discounted cash-flow techniques.;D.The payback method generally leads to the same decision as other investment selection methods;uestion 23 of 25;4.0 Points;The internal rate of return is the interest rate that equates the cash outflows of an investment with the subsequent inflows.;A. True;B. False;Question 24 of 25;4.0 Points;Simulation models allow the analyst to test possible changes in the variables used in the model.;A. True;B. False;uestion 25 of 25;4.0 Points;The first step in the capital budgeting process is;A.collection of data.;B.idea development.;C.assign probabilities.;D.determine cashflow.
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