16) The cost of capital is: 1. The opportunity cost of using funds to invest in new projects 2. The rate of return the firm must earn on its investments in order to satisfy the required rate of return of the firm's investors 5 3. The required rate of return for new capital investments which have typical or average risk 4. All of the above 17) Which of the following best measures a portfolio's risk? 1. Expected return 2. Standard deviation 3. Cash return 4. Probability distributions 18) A firm that maintains stable cash dividends will generally NOT increase the dividend unless: 1. A stock split occurs 2. Acquisition happens 3. Management is sure that a higher dividend policy can be maintained 4. None of the above 19) Equivalent Annual Cost (EAC) is used for evaluating mutually exclusive projects when: 1. Projects are risky 2. IRR of both projects is positive 3. Useful life of projects differ 4. Discount rate is too low