Question 291 pts

Which of the following statements is CORRECT?

Group of answer choices

The MIRR method assumes that cash flows are reinvested at the crossover rate.

One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on a generally more reasonable reinvestment rate assumption.

The MIRR and NPV decision criteria can never conflict.

The IRR method can never be subject to the multiple IRR problem, while the MIRR method can be.

The higher the WACC, the shorter the discounted payback period.

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Question 301 pts

LaPango Inc. estimates that its average-risk projects have a WACC of 10%, its below-average risk projects have a WACC of 8%, and its above-average risk projects have a WACC of 12%. Which of the following projects (A, B, and C) should the company accept?

Group of answer choices

All of the projects should be accepted.

Project A, which is of average risk and has a return of 9%.

None of the projects should be accepted.

Project C, which is of above-average risk and has a return of 11%.

Project B, which is of below-average risk and has a return of 8.5%.

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Question 311 pts

Assume that you are on the financial staff of Vanderheiden Inc., and you have collected the following data: The yield on the companys outstanding bonds is 7.75%, its tax rate is 40%, the next expected dividend is $0.65 a share, the dividend is expected to grow at a constant rate of 6.00% a year, the price of the stock is $16.00 per share, the flotation cost for selling new shares is F = 10%, and the target capital structure is 45% debt and 55% common equity. What is the firm's WACC, assuming it must issue new stock to finance its capital budget?

Group of answer choices

7.80%

8.58%

7.88%

9.61%

9.45%

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Question 321 pts

Which of the following statements is CORRECT?

Group of answer choices

Projects with normal cash flows must have two changes in the sign of the cash flows, e.g., from negative to positive to negative. If there are more than two sign changes, then the cash flow stream is nonnormal.

The multiple IRR problem can arise if a projects cash flows are normal.

Projects with nonnormal cash flows are almost never encountered in the real world.

Projects with normal cash flows can have only one real IRR.

Projects with normal cash flows can have two or more real IRRs.