1. Strikes, lawsuits, regulatory actions, or the loss of a key account are all examples of A) diversifiable risk B) market risk C) economic risk D) systematic risk 2. A decrease in the Treasury Bill rate A) has no effect on the required rate of return of a common stock B) increases the required rate of return of a common stock C) decreases the beta of a common stock D) decreases the required rate of return of a common stock 3. Evaluate the following projects using the payback method assuming a rule of 3 years for payback. Year Project A 0 -10.000 4,000 2 4.000 3 4,000 Project B -10,000 4,000 3,000 2,000 1,000,000 A) Project A can be accepted because the payback period is 2.5 years but Project B cannot be accepted because it's payback period is longer than 3 years. B) Project B should be accepted because even though the payback period is 2.5 years for Project A and 3.001 for project B, there is a $1,000,000 payoff in the 4th year in Project B. C) Project B should be accepted because you get more money paid back in the long run. D) Both projects can be accepted because the payback is less than 3 years. 4. Company A has an investment project that offers a 10% internal rate of return. If company A's weighted of capital is 15%, based on the IRR criterion what is the investment decision A) Accept the project B) IRR cannot be used for independent investment project and does not apply here C) The project can either be rejected or accepted depending on the type of cash flow D) Reject the project 5. If a project has a net present value equal to zero, then: A) the total of the cash inflows must equal the initial cost of the project. B) the project earns a return exactly equal to the discount rate. C) a decrease in the project's initial cost will cause the project to have a negative NPV. D) any delay in receiving the projected cash inflows will cause the project to have a positive NPV