Question 1 _ 1A. An investment project has a negative net present value. The internal rate of return is A. less than the cost of capital. B. greater than the cost of capital. C. equal to the cost of capital. 1B. As the weighted average cost of capital goes down, one would expect A. fewer investment projects to be accepted. B. more investment projects to be accepted. 1C. The bonds issued by Jones Corporation are rated AA by Standard & Poor's and have 10 years to maturity and a YTM of 6%. The bonds of Smith Corporation are rated B by Standard & Poor's and also have 10 years to maturity and a YTM of 6%. As a bond investor, which bond is the better buy? A. Grace Corporation bonds. B. Jesse Corporation bonds. C. The investor should be indifferent between the two bonds since they both have the same time to maturity and the same yield to maturity. 1D. A two - for one stock split results in A. the market price doubling. B. the market price being cut in half. C. the number of shares outstanding decreasing by 50%. 1E. The internal rate of return assumes that if all cash flows from an investment were reinvested by the firm A. they could be reinvested at the internal rate of return. B. they could be reinvested at the cost of capital. C. they could be reinvested at the risk-free rate of return 17. Investors like convertible bonds because: A. they pay higher interest than nonconvertible bonds B. they are much safer than nonconvertible bonds C. they have the safety of bonds with the potential for high returns due to the possible appreciation in the market value of the company's stock D. the returns on convertible stock will always be higher than what an investor could get by just buying the company's stock directly