Number 171 Styles Cells Editing An Educator Tasks (12) A financial manager must decide between new project opportunities for the upcoming year. The financial manager has several projects to choose from, and he wants to avoid any projects with potential agency costs. Which project could result in agency costs to the firm? OA project to expand the employee stock program to compensate upper management with shares of ownership in the company OA project to implement a leadership training program for all new employees of the company who show high potential OA project to fund expensive luxury corporate jets for upper management and purchase a private island to entertain potential partners OA project to purchase new equipment for the manufacturing facility that is shown to provide a higher return than alternative projects and reduce company costs significantly +100 12:52 PM 84F Partly sunny A 4 6/6/2022 Number 17 ducator Tasks Styles Cells Editing Company costs Significantly 13 What is the cost of capital for a firm in terms of financing decisions? The interest rate that represents the cost for a company to use debt or equity The principal or original borrowing amont of a loan The compound rate used to determine when future payments will occur The cost to purchase a piece of new equipment for a firm 14) A company is choosing between several similar projects with the same risk level. If the company wants to maximize the value it will create for shareholders, which project should it choose? OA project in which the required return by investors is higher than the potential return on investment OA project that provides a return significantly higher than the hurdle rate A project in which the opportunity cost is much greater than the potential returns A project that provides a lower return on investment than the firm's chosen discount rate Number 12 Educator Tasks Styles Cells Editing Anal 15 A firm has issued corporate bonds and will need to make interest payments to bondholders. What is another name for the interest the firm must pay? Required rate of return Discount rate Inflation Cost of capital 16 Why does compounding interest provide a higher return to investors than simple interest? Compounding interest is interest on interest, so over time, the dollar amount of interest payments grows. O Compounding interest rates are usually higher than simple interest rates, so a larger portion of the principal amount is returned to investors each period. O Compounding interest is used for riskier projects, which provide a greater return to investors as compensation for the additional risk. To qualify for a compounded interest rate, investors must provide a larger principal amount, which would cause interest payments on that principal to be higher