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10) If the expected rate of return on a stock exceeds the required rate. The stock is experiencing supernormal growth. b. a. The stock should
10) If the expected rate of return on a stock exceeds the required rate. The stock is experiencing supernormal growth. b. a. The stock should be sold. The company is probably not trying to maximize price per share. d. c. The stock is a good buy e. Dividends are not being declared. 11) All else equal, risk averse investors generally require investments with returns to purchase risks. a. higher, lower b. lower; higher c. higher: higher d. None of the above is correct 12) Which of the following is not a rationale for using the NPV method in capital budgeting? An NPV of zero signifies that the project's cash flows are just sufficient to repay the invested capital and to provide the required rate of return on that capital. A project whose NPV is positive will increase the value of the firm if that project is accepted A project is considered acceptable if it has a positive NPV A project is not considered acceptable if it has a negative NPV. All of the above are true. a. b. c. d. e. 13) Union Atlantic Corporation, which has a required rate of return equal to 14 percent, is evaluating a capital budgeting project that has the following characteristics: Year Cash Flows S(170,000) 60,750 60,750 60,750 60,750 Union Atlantic's capital budgeting manager has determined that the project's net present value is $7,008. According to this information, which of the following statements is correct? a. The project's internal rate of return (IRR) must be less than 14 percent. b. The project's discounted payback must be less that its economic life. c. The project should be purchased by Union Atlantic. d. All of these statements are correct. e. None of these statements is correct
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