Number 5 Format as Table Delete Cell Styles Format Analyze Data Styles Cells Editing Analysis MyEducator Tasks (51) Why is the capital asset pricing model (CAPM) useful? O It provides a way to value a perpetuity. It allows a discount rate to be determined. O It provides a way to price risk. O It allows for calculation of the present value of future cash flows. Scol Lick Backspace (52) A new associate at a corporation is tasked with ranking various projects for the CEO's approval. The associate decides to rank th projects based on the IRR, NPV, and PL as indicated in the following table Project A B Initial Outlay $2,750 $3,000 RR NPV 35% $125 20% $100 1,057 PE 1070 Dr Est Syka Ha End Now Lock 101PM Raincoming A Coppolack Sand 9 Poge Up PgUp Home General Conditional Formatting Insert Format as Table Delete Analy Cell Styles- Format Data Number 19 Styles Cells Editing Analys MyEducator Tasks (52) A new associate at a corporation is tasked with ranking various projects for the CEO's approval. The associate decides to rank the projects based on the IRR, NPV, and Pl, as indicated in the following table: Project Initial Outlay IRR NPV PI A $2,750 35% $175 1,070 B $3,000 20% $100 1057 C $5,500 10% $150 1060 D $5,000 15% $250 1,066 What is the correct ranking of the projects from most valuable to least valuable? O Project A Project D, Project C. Project B O Project D. Project B. Project A, Project C O Project B. Project C, Project D. Project A O Project C. Project A, Project 8. Project D Lock htt Sya ht Fone Backspace Hain coming ^40 www 71 Capelink Su Home End Num Lock 2 $ % 9 Format as Table- Cell Styles- Delete Format Analy Duta 15 Number 6 Styles Cel Editing Analysi MyEducator Tasks (53) Why is the cost of capital for common stocks typically higher than the cost of capital for preferred stocks or bonds? O Common stock creates tax shields for a company, while preferred stocks and bonds do not O Common stockholders have first claim in liquidation before preferred stockholders and bondholders. O Common stock does not create tax shields, while preferred stocks and bonds do. O Common stockholders' claims in liquidation come after preferred stockholders and bondholders. 54) A group of investors want to start a new manufacturing business. Last year they conducted market research costing $30,000 to assess the business's potential. The investors bought equipment +Rain cong 84 40 Dane Capetson Sa Backspace Howe 1nd Hum lock Dulate hige 7 Palle Up Home Number Formatasable Cell Styles- Delete Format- Analyze Data Styles Cells Eating Analys MyEducator Tasks O Common stockholders' claims in liquidation come after preferred stockholders and bondholders. (54) A group of investors want to start a new Q manufacturing business. Last year they conducted market research costing $30,000 to assess the business's potential. The investors bought equipment for $100,000 to test manufacturing processes and paid $150,000 for land purchased five years ago to use as the location for a factory. In order to start the business. the investors must spend $1.2 million for a new factory. Which cost is relevant for estimating the cash flows of starting this business? O $30,000 cost of market research O $100,000 paid for equipment O $150,000 purchase price of the land O $1.2 million for a new factory End Backspace Chelte Page Sp Lock 108 Page 5 Down 9 Enter 3 PyD General Conditional Formatting Insert $-% 9 Format as Table Delete -P- Cell Styles Format 19 Number 19 Styles Cells Editing MyEducator Tasks O $30,000 cost of market research O $100,000 paid for equipment $150,000 purchase price of the land O $1.2 million for a new factory 55) Why should the timing of cash receipts be considered in capital budgeting? Because of the effect of sunk costs Because of the effect of regulations O Because of the effect of inflation O Because of the effect of opportunity costs (56) What is the role of the time value of money in making capital investment decisions? O if the present value of the benefits of a capital investment exceeds the present value of the costs. then the investment will add value to the firm 40 Scroll Lock PASC Sya TOPM Rain coming Mulock Clack Sand Suck Cells Editing Analy MyEducator Tasks O Because of the effect of opportunity costs (56) What is the role of the time value of money in making capital investment decisions? O If the present value of the benefits of a capital investment exceeds the present value of the costs, then the investment will add value to the firm. O if the future cash inflows of the project are greater than the future cash outflows of the project then the project will add value to the firm. O If all cash flows are compounded to the end date of the project and then compared to the initial outlay. then the project will add value to the firm. O if the present value of the Initial outlay is greater than the present value of the future cash flows, then the investment will add value to the firm. Sou Look Backspace 57) Should an identical cost of capital be used for all Syk 104PM Rain coming de Pap 400 Hum lack Home End Num lock Coin S Delate Pugh 7 Up Home t 5 b Page D ent Number F Styles E Cells Edting MyEducator Tasks (57) Should an identical cost of capital be used for all projects in a firm, and why or why not? O Yes, the projects all have the same opportunity costs. O No, the projects may have different cash flow amounts, O No, the projects may have varying amounts of risk. O Yes, the projects all represent the firm's nonsystematic risk. (58) Which type of decision is a firm making when it is deciding what proportions of debt and equity to use? An investment decision O Arisk decision An equity decision OA financing decision lock Die Sc Syska ht Breck Backspace 101 PM Kan coming 40 Capelers Sent Link Home End Num Lock 8 MyEducator Tasks O Yes, the projects all represent the firm's nonsystematic risk. Editing 58) Which type of decision is a firm making when it is deciding what proportions of debt and equity to use? O An investment decision OA risk decision O An equity decision OA financing decision 59 Time Value of Money Calculations Answer the following questions using the Excel PV and FV functions. Please directly type input variables in the appropriate cells. When you type in numbers, please be careful with the signs of cash flows: the number should be positive for cash inflows (money coming in), and the number should be negative for cash outflows (money going out). You must reference every input . Raincoming 152122 Pant 47 Lock Note Lock Copelor's Soul Lak ackspace Home End Num Lock