Select best answer

20. Which of the following statements about financial risks is incorrect?

a. Risk requires the possibility of at least one return less favorable than the expected return

b. Risk requires the possibility of more than one return

c. Risk is one of the determinants of the project cost of capital (discount rate)

d. The higher the risk, the lower the project cost of capital (discount rate)

e. In financial analysis, investors are assumed to be risk averse

15. Which of the following about capital rationing is(are) most correct?

a. capital rationing occurs when a business does not have the capital necessary to fund all acceptable projects

b. capital rationing occurs when a business has more capital available than needed to fund all acceptable projects

c. under capital rationing, the typical approach is to accept all projects with negative and present values

d. answers (a) and (b) are correct

e. answers (a), (b), and (c) are correct