5-1. An assumption of discount rate of 9 percent and 3 percent growth would be broadly consistent with a multiple of enterprise value to free cash flow of 16.1.

TrueFalse

5-2. You are considering two projects and can choose only one: the first has an IRR of 15 percent, and the other, an IRR of 25 percent. If the WACC is 12 percent, you should always choose the project with the IRR of 25.

TrueFalse

5-3. The present value (PV) of cashflows from a project is sufficient to determine if the project creates value for a business.

TrueFalse

5-4. A share buyback could be interpreted as a reflection of management's view that the market price of the firm's shares is lower than their true value, and thus would lead to a fall in the share price.

TrueFalse

5-5. From a finance perspective, conglomerates are problematic, because the purported diversification benefits that create value for their shareholders is likely to be illusory considering that shareholders can diversify on their own and do not need the company to do it for them.

TrueFalse

5-6. The issue of equity often cause a company's stock price to decrease because of signaling.

TrueFalse

5-7. Management should prioritize payment of dividends because that would create value for shareholders.

TrueFalse