MBA 621 exam Questions & Answers
Verified 100% Correct
The internal rate of return rule can result in the wrong decision if the projects
being compared have:
differences in scale or differences in timing
Which of the following statement is TRUE?
A capital budget lists the projects and investments that a company plans to undertake
during the coming year.
Which of the following statement(s) is/are true?
We begin the capital budgeting process by determining the incremental earnings of a project.
The marginal corporate tax rate is the tax rate the firm will pay on an incremental dollar of pre-
tax income.
The opportunity cost of using a resource is the value it could have provided in its
best alternative use.
Which of the following statement(s) is/are TRUE?
I) Most projects will require the firm to invest in net working
capital III) ΔNWCt = NWCt - NWCt - 1.
IV) In the final year of a project, the firm ultimately recovers the investment in net
working capital.
Which of the following cash flows are relevant incremental cash flows for a project that you
are currently considering investing in?
The tax savings brought about by the project's depreciation expense and Research
and Development expenditures you will make in carrying out the project.
, Which of the following investments offered the highest overall return over the past eighty
years? Also had largest fluctuations
small stocks
Suppose you invested $60 in the iShares Dividend Stock Fund (DVY) a month ago. It paid
a dividend of $0.63 today and then you sold it for $65. What was your return on the
investment?
(0.63 + 65 -60)/60 = 9.38%
Amazon.com stock prices gave a realized return of 5%, -5%, 11%, and -11% over four
successive quarters. What is the annual realized return for Amazon.com for the year?
(1 + 0.05) x (1 - 0.05) x (1 + 0.11) x (1 - 0.11) = 0.9854; 0.9854 - 1 = -1.46%
The S&P 500 index delivered a return of 20%, -10%, 20%, and 5% over four successive years.
What is the arithmetic average annual return for four years?
8.75%
As we add more uncorrelated stocks to a portfolio where the stocks are held in
equal weights, the benefit of diversification is most dramatic ________.
at the outset
Diversification reduces the risk of a portfolio because ________, and some of the risks are
averaged out of the portfolio.
stocks do not move identically
The standard deviation of returns of ________
Small stocks are higher than that of large stocks and corporate bonds are higher than T-bills.
A company's stock price fell when it announced that its revenue had decreased because
of the quality issues of its products. This is an example of ________.
Unsystematic risk
Verified 100% Correct
The internal rate of return rule can result in the wrong decision if the projects
being compared have:
differences in scale or differences in timing
Which of the following statement is TRUE?
A capital budget lists the projects and investments that a company plans to undertake
during the coming year.
Which of the following statement(s) is/are true?
We begin the capital budgeting process by determining the incremental earnings of a project.
The marginal corporate tax rate is the tax rate the firm will pay on an incremental dollar of pre-
tax income.
The opportunity cost of using a resource is the value it could have provided in its
best alternative use.
Which of the following statement(s) is/are TRUE?
I) Most projects will require the firm to invest in net working
capital III) ΔNWCt = NWCt - NWCt - 1.
IV) In the final year of a project, the firm ultimately recovers the investment in net
working capital.
Which of the following cash flows are relevant incremental cash flows for a project that you
are currently considering investing in?
The tax savings brought about by the project's depreciation expense and Research
and Development expenditures you will make in carrying out the project.
, Which of the following investments offered the highest overall return over the past eighty
years? Also had largest fluctuations
small stocks
Suppose you invested $60 in the iShares Dividend Stock Fund (DVY) a month ago. It paid
a dividend of $0.63 today and then you sold it for $65. What was your return on the
investment?
(0.63 + 65 -60)/60 = 9.38%
Amazon.com stock prices gave a realized return of 5%, -5%, 11%, and -11% over four
successive quarters. What is the annual realized return for Amazon.com for the year?
(1 + 0.05) x (1 - 0.05) x (1 + 0.11) x (1 - 0.11) = 0.9854; 0.9854 - 1 = -1.46%
The S&P 500 index delivered a return of 20%, -10%, 20%, and 5% over four successive years.
What is the arithmetic average annual return for four years?
8.75%
As we add more uncorrelated stocks to a portfolio where the stocks are held in
equal weights, the benefit of diversification is most dramatic ________.
at the outset
Diversification reduces the risk of a portfolio because ________, and some of the risks are
averaged out of the portfolio.
stocks do not move identically
The standard deviation of returns of ________
Small stocks are higher than that of large stocks and corporate bonds are higher than T-bills.
A company's stock price fell when it announced that its revenue had decreased because
of the quality issues of its products. This is an example of ________.
Unsystematic risk
