Page 1 of 62
“FINANCIAL MANAGMENT FINAL EXAM “ NEWEST UPDATED EXAM 2025 – 2026
SOLVED QUESTIONS & ANSWERS VERIFIED 100% GRADED A+ (LATEST VERSION)
WELL REVISED AND HIGHLY RECOMMENDALE| ALREADY PASSED!!
Financial Managment Final Exam
If bankruptcy costs and/or shareholder under diversification are an issue, what
measure of risk is relevant when evaluating project risk in capital budgeting?
A.
systematic risk
B.
capital rationing risk
C.
contribution−to−firm
risk
Your answer is correct.
D.
total project risk
C.
contribution−to−firm
risk
Which of the following statements about project standing alone risk is true?
A.
It takes into consideration the effects of diversification of the firm's
shareholders.
B.
It provides the best measure of project risk for a large, widely−held company.
C.
, Page 2 of 62
It ignores the fact that much of the risk of a project will be diversified away as
the project is combined with the firm's other projects.
Your answer is correct.
D.
It ignores the cash flows that are associated with a project that occur beyond
the payback period.
C.
It ignores the fact that much of the risk of a project will be diversified away as the
project is combined with the firm's other projects.
The pure play method
A.
calculates beta using only project returns.
B.
selects one of the firm's existing projects that is similar to the project being
analyzed and uses that project's required rate of return.
C.
selects a firm similar to the project being analyzed and uses its returns as the
market return in estimating a project beta.
D.
uses the beta of a firm that is similar to the project being analyzed to
determine the required rate of return for the project.
D.
uses the beta of a firm that is similar to the project being analyzed to determine the
required rate of return for the project.
Humongous Corporation is a multidivisional conglomerate. The Food Division
is undergoing a capital budgeting analysis and must estimate the division's
beta. This division has a different level of systematic risk than is typical for
Humongous Corporation as a whole. The most appropriate method for
estimating this beta is
A.
the regression coefficient from a time series regression of Humongous
Corporation stock returns on a market index.
B.
the regression coefficient from a time series regression of Food Division's net
, Page 3 of 62
income on the Humongous Corporation's return on assets.
C.
to multiply the company's beta by the ratio of the Food Division's total
assets/Humongous Corporation total assets.
D.
the regression coefficient from a time series regression of Food Division's
return on assets on a market index.
D.
the regression coefficient from a time series regression of Food Division's return on
assets on a market index.
In terms of capital budgeting, a project's risk can be looked at on three levels.
What are they?
There are three types of capital-budgeting risk: (Select from the drop-down
menus.)
(1) The ___________________________, which is a project's risk ignoring the
fact that much of this risk will be diversified away as the project is combined
with the firm's other projects.
(2) The project's _________________________, which is the amount of risk that
the project contributes to the firm as a whole.
(3) The project's _____________________, which is the risk of the project from
the viewpoint of a well-diversified shareholder.
standing alone risk
contribution-to-firm risk
systematic risk
Give an example of an option to delay a project.
Which of the following is an example of an option to delay a project? (Select
the best choice below.)
A.
The option to wait for one year to open a restaurant.
Your answer is correct.
B.
The option to shut down a mining operation due to the depletion of the ore
reserves.
C.
, Page 4 of 62
The option to increase production if the new product launches successfully.
D.
The option to enter into the foreign markets.
A.
The option to wait for one year to open a restaurant.
Give an example of an option to expand a project.
Which of the following is an example of an option to expand a project? (Select
the best choice below.)
A.
The option to wait for one year to open a restaurant.
B.
The option to increase production if the new product launches successfully.
Your answer is correct.
C.
The option to refinance at a lower rate to prepay the home mortgage.
D.
The option to shut down a mining operation due to the depletion of the ore
reserves.
B.
The option to increase production if the new product launches successfully.
Which of the following SHOULD be included as incremental costs when
evaluating capital projects?
(Select the best choice below.)
A.
Expenses associated with the modification of the firm's production facility in
order to invest in a project.
B.
Investment in working capital that is directly related to a project.
C.
Opportunity costs that are directly related to a project.
D.
All of the above.
D.
All of the above.
“FINANCIAL MANAGMENT FINAL EXAM “ NEWEST UPDATED EXAM 2025 – 2026
SOLVED QUESTIONS & ANSWERS VERIFIED 100% GRADED A+ (LATEST VERSION)
WELL REVISED AND HIGHLY RECOMMENDALE| ALREADY PASSED!!
Financial Managment Final Exam
If bankruptcy costs and/or shareholder under diversification are an issue, what
measure of risk is relevant when evaluating project risk in capital budgeting?
A.
systematic risk
B.
capital rationing risk
C.
contribution−to−firm
risk
Your answer is correct.
D.
total project risk
C.
contribution−to−firm
risk
Which of the following statements about project standing alone risk is true?
A.
It takes into consideration the effects of diversification of the firm's
shareholders.
B.
It provides the best measure of project risk for a large, widely−held company.
C.
, Page 2 of 62
It ignores the fact that much of the risk of a project will be diversified away as
the project is combined with the firm's other projects.
Your answer is correct.
D.
It ignores the cash flows that are associated with a project that occur beyond
the payback period.
C.
It ignores the fact that much of the risk of a project will be diversified away as the
project is combined with the firm's other projects.
The pure play method
A.
calculates beta using only project returns.
B.
selects one of the firm's existing projects that is similar to the project being
analyzed and uses that project's required rate of return.
C.
selects a firm similar to the project being analyzed and uses its returns as the
market return in estimating a project beta.
D.
uses the beta of a firm that is similar to the project being analyzed to
determine the required rate of return for the project.
D.
uses the beta of a firm that is similar to the project being analyzed to determine the
required rate of return for the project.
Humongous Corporation is a multidivisional conglomerate. The Food Division
is undergoing a capital budgeting analysis and must estimate the division's
beta. This division has a different level of systematic risk than is typical for
Humongous Corporation as a whole. The most appropriate method for
estimating this beta is
A.
the regression coefficient from a time series regression of Humongous
Corporation stock returns on a market index.
B.
the regression coefficient from a time series regression of Food Division's net
, Page 3 of 62
income on the Humongous Corporation's return on assets.
C.
to multiply the company's beta by the ratio of the Food Division's total
assets/Humongous Corporation total assets.
D.
the regression coefficient from a time series regression of Food Division's
return on assets on a market index.
D.
the regression coefficient from a time series regression of Food Division's return on
assets on a market index.
In terms of capital budgeting, a project's risk can be looked at on three levels.
What are they?
There are three types of capital-budgeting risk: (Select from the drop-down
menus.)
(1) The ___________________________, which is a project's risk ignoring the
fact that much of this risk will be diversified away as the project is combined
with the firm's other projects.
(2) The project's _________________________, which is the amount of risk that
the project contributes to the firm as a whole.
(3) The project's _____________________, which is the risk of the project from
the viewpoint of a well-diversified shareholder.
standing alone risk
contribution-to-firm risk
systematic risk
Give an example of an option to delay a project.
Which of the following is an example of an option to delay a project? (Select
the best choice below.)
A.
The option to wait for one year to open a restaurant.
Your answer is correct.
B.
The option to shut down a mining operation due to the depletion of the ore
reserves.
C.
, Page 4 of 62
The option to increase production if the new product launches successfully.
D.
The option to enter into the foreign markets.
A.
The option to wait for one year to open a restaurant.
Give an example of an option to expand a project.
Which of the following is an example of an option to expand a project? (Select
the best choice below.)
A.
The option to wait for one year to open a restaurant.
B.
The option to increase production if the new product launches successfully.
Your answer is correct.
C.
The option to refinance at a lower rate to prepay the home mortgage.
D.
The option to shut down a mining operation due to the depletion of the ore
reserves.
B.
The option to increase production if the new product launches successfully.
Which of the following SHOULD be included as incremental costs when
evaluating capital projects?
(Select the best choice below.)
A.
Expenses associated with the modification of the firm's production facility in
order to invest in a project.
B.
Investment in working capital that is directly related to a project.
C.
Opportunity costs that are directly related to a project.
D.
All of the above.
D.
All of the above.
