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Question 1 Not yet answered Marked out of 1.00 Flag question Question text Company A has an internal cost of capital of 7% annually. It
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Company A has an internal cost of capital of 7% annually. It is evaluating its investment options against its internal costs and has identified three potential investments: Investment A: Bond with annual returns of 8% Investment B: Bond with annual returns of 4% Investment C: Bond with annual returns of 12% Which of the above investments should the company consider taking on given its internal cost of capital?
Select one:
a. A only
b. C only
c. A and C only
d. B only
Question 2
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The optimal capital budget represents the intersection of what two items?
Select one:
a. Marginal return on capital and marginal cost
b. Net future value and internal rate of return
c. Marginal cost and net present value
d. Internal rate of return and net present value
Question 3
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What is the first step of evaluating a projects cash flows?
Select one:
a. Evaluate whether to do the project.
b. Break down the projects key elements.
c. Determine the projects needs.
d. Evaluate all the cash flows.
Question 4
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What does the payback period represent?
Select one:
a. The time it takes to gain a return on investment
b. The time it takes to recover the money invested
c. The risk to the capital invested
d. The required rate of return on an investment
Question 5
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An optimal capital budget is the set of projects that does which of the following?
Select one:
a. Minimizes the company's value
b. Levels the company's value
c. Maximizes the company's value
d. Balances the company's value
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