1. ____

You are analyzing the cost of capital for a firm that is financed with $300,000 of equity and $200,000 of

debt. The cost of debt capital for the firm is 9 percent, while the cost of equity capital is 19 percent.

What is the overall cost of capital for the firm?

a. 12% b. 11% c. 16% d. 15%

Ch 10

2. ____

Which of the following is NOT true about capital budgeting?

a. It allows a firm's management to analyze potential new business assets and decide on which ones to undertake.

b. It involves identifying projects that will add to a firm's value.

c. It involves investing large capital.

d. It allows a firm to reverse the decision of large capital investments at any time.

3. ____

Two projects are considered to be mutually exclusive if

a. selecting one would automatically eliminate accepting the other.

b. the projects perform the same function.

c. both selecting one would automatically eliminate accepting the other and the projects perform the same function.

d. none of these.

4. ____

To accept a capital project when using NPV,

a. the project NPV should be less than zero.

b. the project NPV should be greater than zero.

c. both the project NPV should be greater than zero and the project NPV should be less than zero.

d. none of these.