6. Unsystematic risk A, can be effectively eliminated by portfolio diversification B. is compensated for by the risk premium. C. is measured by beta. D. is measured by standard deviation. E. is related to the overall economy 7. The excess return earned by a risky asset, for example with a beta of 1.4, over that earned by a risk-free asset is referred to as a: A. market risk premium. B. risk premium C systematic return. D. total return. E real rate of return. 8. The pre-tax cost of debt (part of the weighted average cost of capital) A. is based on the current yield to maturity of the firm's outstanding bonds. B. is equal to the coupon rate on the latest bonds issued by a firm. C is equivalent to the average current yield on all of a firm's outstanding bonds. D. is based on the original yield to maturity on the latest bonds issued by a firm. E. has to be estimated as it cannot be directly observed in the market. 9. You are trying to decide between three mutually exclusive investment opportunities. The most appropriate tool for identifying the correct decision is A profitability index B. incremental internal rate of return (IRR) C net present value (NPV) D. internal rate of return (IRR) 10. The term "cannibalization" refers to A decrease in the sunk cost caused by launching of new project B. decrease in the sales of current project caused by the launching of new project C cost of using a resource for the best value t could provide in its best alternative D. decrease in overhead expenses incurred due to launch of new project