1. The the risk, the the coefficient of variation. A. higher, lower C. lower; higher B. higher; higher D. more stable; higher 2. The portion of an asset's risk that is attributable to market factors which affect all firms, is called A. diversifiable rivk B. unsystematic risk C. non-liversifiable risk D. none of them is correct 3. An investment banker has recommended a 5100,000 portfolio containing assets A, B, and C. $40,000 will be invested in asset A, with a beta of 1.5;$30,000 will be invested in asset B, with a beta of 2.0; and $30,000 will be invested in asset C, with a beta of 0.5. The beta of the portfolio is A. 1.25 B. 1.35 C. 1.40 D. 1.55 4. What is the expected retum for asset X if it has a beta of 1.5, the expected market return is 15%. ahd the expected risk-free rate is 5% ? A. 5% B. 10% C. 15% D. 20% 5. Projects that compete with one another, such that approval of one exchudes consideration of the others, are refencul to as A. indupandent projects. C. replacement projects. B. mutually exclusive projects: D. nome of the above. 6. A project's cost of capital is 14 percent and the initial after-tix cost is $4,500,000 and it is expected to provide after-tax operating cash inflows of 51,800,000 in year 1,$2,000,000 in year 2 , $1,500,000 in year 3 and $1,200,000 in year 4 . What is the project's NPV? A. $1,700,000 C. $340,836 B. 5263,889 D. (522,702) 7. On a purely theoretical basis, the NPV is the better approach to capital bodgeting due to the following reasons A. that it measures the benefits relative to the amount invested. B. for the reasonableness of the reinvestnsent rate assumption. C. that there may be single solutions for an IRR computation. D. that it minimizes shareholder wealth. 8. Cash flows of any project comprises the following components, exeept A. initial investment C. terminal cash flows B. operating cash inflows D. sunk cost 9. The next best alternative of occupying a building is renting it out for rent income, this is called C. sunk cost A. opportunity cost B. irrelevant cost D. none is correct 10. In a replacement project, the initial outlay is different from that of expansion project in temms of A. after-tax proceeds from sale of old asset B. the change in net working capital C. purchase price D. after-tax proceeds from sale of old assct and the change in net working capital