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davenport finc620 week 2 quiz

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Question;?;uestion 1;2 out of 2 points;Assume a project has normal cash flows. All else;equal, which of the following statements is CORRECT?;?;Question 2;2 out of 2 points;Masulis Inc. is considering a project that has the following cash flow;and WACC data. What is the project's discounted payback?;WACC;10.00%;Year;0;1;2;3;4;Cash flows;-$950;$525;$485;$445;$405;?;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.;WACC;10.00%;Year;0;1;2;3;Cash flows;-$1,000;$450;$450;$450;?;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?

 

Paper#50571 | Written in 18-Jul-2015

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