17. 18.

Westgate company selects projects using the NPV approach but real options associated with projects have never been considered. Which of the following statements is most likely to describe its situation? Select one: O a. Failing to consider abandonment and flexibility options probably makes the optimal capital budget too large, but failing to consider growth and timing options probably makes the optimal capital budget too small, so it is unclear what impact not considering real options has on the overall capital budget. O b. Its estimated capital budget is probably too small, because projects' NPVs are often larger when real options are taken into account. . Real options should not have any effect on the size of the optimal capital budget. Od Its estimated capital budget is probably too large due to its failure to consider abandonment and growth options CAPM: Suppose we are at the end of a Global Financial Crisis. During the coming year, the risk free rate is expected to remain the same, while the market risk premium is expected to fall. Given this forecast, which of the following statements is CORRECT? Select one: Ob The required rate of return for all stocks will fall by the same amount. The required rate of return will fall for all stocks, but it will fall less for stocks with higher betas. The required rate of return on all stocks will remain unchanged. The required rate of return will fall for all stocks, but it will fall more for stocks with higher betas. Od