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unit-5 management mock test
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STUDENT PASSCODE- BATCH01
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high liquidity premium
high inflation premium
high default premium
high yield premium
legal rights classification
Net present value
Internal rate of return
Accounting/Simple rate of return
Cash payback period
Internal rate of return method
Simple cash payback method
Net present value method
Discounted cash payback method
net present value of the project
net future value of the project
net historical value of the project
net salvage value of the project
negative or zero
negative or positive
positive or zero
B C A
C A B
B A C
reduce the present value of future cash flows.
Increase the present value of future cash flows.
have no effect on net present value.
compensate for reduced risk.
the lower the profitability index, the more desirable the project.
the lower the sunk cost, the more desirable the project.
the higher the sunk cost, the more desirable the project.
the higher the profitability index, the more desirable the project.
A C D B
B C D A
D C A B
C A B D
If the profitability index of a project is 0.75, it means:
the project's cost is less than the present value of its cash flows
the NPV of the project is greater than 1
the project returns 75 cents in present value for each dollar invested in it
business scorecard report
an independent project
a mutually exclusive project
a rational project
an independent project
a dependent project
an essential project
a contingent project
greater than the difference obtained using total cost approach
less than the difference obtained using total cost approach
the same as the difference obtained using total cost approach
It avoids the problem of computing the required rate of return for each investment
It is the only way to measure a firm's required return.
It acknowledges that most new investment projects have about the same degree of risk
It acknowledges that most new investment projects offer about the same expected return.
Discount rate which the firm should apply to all of the projects it undertakes
Rate of return a firm must earn on its existing assets to maintain the current value of its stock.
Coupon rate the firm should expect to pay on its next bond issue
. Maximum rate which the firm should require on any projects it undertakes
Return the stock minus the risk-free rate.
Difference between the return on the market and the risk-free rate.
Beta times the market risk premium
Beta times the risk-free rate.
Security Market Line.
. Capital Market Line
. Characteristic line
Discount rate which the firm should apply to all of the projects it undertakes.
Overall rate which the firm must earn on its existing assets to maintain the value of its stock
Rate the firm should expect to pay on its next bond issue
. Maximum rate which the firm should require on any projects it undertakes.
using the firm's beta is the same measure of risk as the project.
the firm is all-equity financed.
the financial risk is equal to business risk.
. Both A and B.
. It is impossible to tell.
It will depend on the NPV.
direction of the market variance.
overall cycle of the market.
.variance of the market and asset, but not their co-movement
covariance of the security with the market and how they are correlated.
All of the above.
standard deviation; variance
. expected return; covariance
. unsystematic risk
market risk premium
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