What determines the prices of stock according to the firm-foundations theory of stock price? What determines changes in the prices of stock according to the efficient-markets theory of stock price? Are the firm-foundation theory and the efficient-markets theory consistent with each other or inconsistent with each other? Why or why not? Suppose that stock in A Firm has a higher expected excess return than stock in Another Firm and they both have the same standard deviation. How are the Sharpe ratios related? According to the Capital Asset Pricing Model, investors are not compensated for bearing nonsystematic (or idiosyncratic) risk. What is nonsystematic risk and why are investors not compensated for bearing this risk? An investor is deciding whether to hold XYZ stock with a beta of one or a market-value weighted portfolio of all stocks traded on exchanges including XYZ. Which is better according to the Capital Asset Pricing Model? Why? A project requiring an investment of $1 million has an internal rate of return of 20 percent. Another project requiring an investment of $10 million has an internal rate of return of 15 percent. Both projects last one year and it is possible to do only one of the two projects. The opportunity cost of funds is 10 percent. Which investment has a higher present value