罗斯公司理财试题库全集.doc

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Chapter 13 Risk, Cost of Capital, and Capital Budgeting Answer Key
Multiple Choice QuRAGE COST OF CAPITAL
Type: DEFINITIONS
 
6. The WACC is used to _______ the expected cash flows when the firm has ____________. 
A. discount; debt and equity in the capital structure
B. discount; short term financing on the balance sheet
C. increase; debt and equity in the capital structure
D. decrease; short term financing on the balance sheet
E. None of the above.
Difficulty level: Medium
Topic: WACC
Type: CONCEPTS
 
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7. Using the CAPM to calculate the cost of capital for a risky project assumes that: 
A. using the firm's beta is the same measure of risk as the project.
B. the firm is all-equity financed.
C. the financial risk is equal to business risk.
D. Both A and B.
E. Both A and C.
Difficulty level: Medium
Topic: CAPM
Type: CONCEPTS
 
8. The use of WACC to select investments is acceptable when the: 
A. correlation of all new projects are equal.
B. NPV is positive when discounted by the WACC.
C. risk of the projects are equal to the risk of the firm.
D. firm is well diversified and the unsystematic risk is negligible.
E. None of the above.
Difficulty level: Easy
Topic: WACC
Type: CONCEPTS
 
9. If the risk of an investment project is different than the firm's risk then: 
A. you must adjust the discount rate for the project based on the firm's risk.
B. you must adjust the discount rate for the project based on the project risk.
C. you must exercise risk aversion and use the market rate.
D. an average rate across prior projects is acceptable because estimates contain errors.
E. one must have the actual data to determine any differences in the calculations.
Difficulty level: Easy
Topic: DISCOUNT RATE
Type: CONCEPTS
 
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10. If the project beta and IRR coordinates plot above the SML the project should be: 
A. accepted.
B. rejected.
C. It i