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Multiple-Choice Questions
2) Usually, the cost of capital for newly issued stock is ________ the cost of
retained earnings.
A) lower than B) higher than
C) same as D) either higher or lower than
3) A stock whose rate of return fluctuates less than the rate of return of a
market portfolio will have a beta that equals
A) 1. B) less than 1.
C) more than 1. D) Either A or C above.
5) Capital rationing
A) exists when a company sets an arbitrary limit on the amount of
investment it is willing to undertake, so that not all projects with an
NPV higher than the cost of capital will be accepted.
B) generally does not permit a company to achieve maximum value.
C) seems to occur quite frequently among corporations.
D) All of the above.
7) Net present value and internal rate of return capital budgeting decisions
can differ because
A) the initial costs of the capital outlays differ.
B) the cash flow streams differ.
C) the discount rates differ for different time periods.
D) All of the above.
8) Simulation analysis
A) permits the calculation of expected value and standard deviation.
B) does not permit the calculation of expected value and standard
deviation.
C) is too complex to ever be used in actual business situations.
D) does not consider probabilities.
19) Probabilities, which are based on past data or experience, are called
A) a priori. B) objective. C) uncertain. D) statistical.
Analytical Question