8. True False Most senior executives are risk averse, meaning they will seek risk only if they expect to be compensated for it

. b. True False The choice of risk perspective has little influence the choice of the risk measurement statistic.

. True False Sensitivity analysis changes multiple variables at one time, while scenario analysis changes just one variable at a time.

True False Income breakeven analysis usually results in a higher breakeven point than NPV breakeven.

True False Expected net present values are calculated by multiplying the possible NPVs by the probabilities and then adding these solutions.

True False Decision trees are gaining in popularity because they identify embedded options and they force managers to do contingency planning.

True False History, expert opinion, and government mandates are three methods for developing probability estimates.

True False Sequential investing is a way to measure risk not a way to manage risk.

True False The weighted average cost of existing capital is the change in the total returns needed to satisfy investors in light of new investment, divided by the amount of capital needed for the investment.

True False The rate paid on the funds raised by the corporation and then used for a new capital investment is the appropriate discount rate for you to use in capital budgeting regardless of the risk of the project.

True False A new investment should not be justified by the benefits of moving to an optimal capital structure. The benefit of moving to an optimal capital structure can be had by raising more of one type of capital and using the proceeds to retire another, without making new investments.

True False Flotation costs are the costs associated with retiring an old issue of debt or equity, such as the fees paid to investment bankers for handling the sale.

True False When calculating the cost of preferred stock, we need not adjust for taxes because dividends do not result in a decrease in the company's income tax.

True False The mean-variance capital asset pricing model approach differs from the constant growth dividend valuation model and the earnings yield model in that it focuses on market returns for investments of similar risk rather than on investor response to a particular security.

. True False If markets are perfectly efficient, the market values of debt and equity will equal present values of the expected cash flows for each of these sources of funding.

True False For capital budgeting, we use projected cash flows, not income statement numbers so deferred taxes are a major source of funding and needs to be considered in calculating the weighted average cost of capital.

True False When short-term debt is used as permanent financing and it is clearly part of the company's permanent capital in substance, then it should be treated like other long-term debt in cost of capital analysis.