AGEC 4040 Final Exam andanswers
(2025 UPDATE).
.___ is the risk to the firm of being unable to cover financial obligations. -
Answer-Financial Risk
.________ probability distribution shows all possible outcomes and
associated probabilities for a given event. - Answer-A continuous
.2. When determining the after-tax cost of a bond, the face value of the
issue must be adjusted to the net proceeds amounts by considering? -
Answer-2. the risk
.58. On a purely theoretical basis, NPA is the better approach to capital
budgeting than IRR because IRR implicitly assumes that any intermediate
cash inflows generated by an investment are reinvested at the firm's cost
of capital. - Answer-58. This is false.
.59. Net present value profiles are most useful when selecting among
, independent projects. - Answer-59. This is false.
.60. As the volume of financing increases, the costs of the various types of
financing will decrease, reducing the firm's weighted average cost of
capital. - Answer-60. True
.61. The cost of capital acts as a major link between the firm's long-
investment decisions and the wealth of the owners as determined by
investors in the marketplace. - Answer-61. True
.62. In computing the weighted average cost of capital, the historic
weights are either book value or market value weights based on actual
capital structure proportions. - Answer-62. True
.63. Projects having higher cash inflows in the early years tend to be less
sensitive to changes in the cost of capital and are therefore often
acceptable at higher discount rates compared to projects with higher cash
inflows that occur in the later years - Answer-63. True
.64. The risk-adjusted discount rate is the rate of return that a project must
earn to maintain or improve the firm's share price. - Answer-64. True
.65. Behavioral approaches for dealing with the risk include adjusted net
present value and risk-adjusted discount rates. - Answer-65. False
(2025 UPDATE).
.___ is the risk to the firm of being unable to cover financial obligations. -
Answer-Financial Risk
.________ probability distribution shows all possible outcomes and
associated probabilities for a given event. - Answer-A continuous
.2. When determining the after-tax cost of a bond, the face value of the
issue must be adjusted to the net proceeds amounts by considering? -
Answer-2. the risk
.58. On a purely theoretical basis, NPA is the better approach to capital
budgeting than IRR because IRR implicitly assumes that any intermediate
cash inflows generated by an investment are reinvested at the firm's cost
of capital. - Answer-58. This is false.
.59. Net present value profiles are most useful when selecting among
, independent projects. - Answer-59. This is false.
.60. As the volume of financing increases, the costs of the various types of
financing will decrease, reducing the firm's weighted average cost of
capital. - Answer-60. True
.61. The cost of capital acts as a major link between the firm's long-
investment decisions and the wealth of the owners as determined by
investors in the marketplace. - Answer-61. True
.62. In computing the weighted average cost of capital, the historic
weights are either book value or market value weights based on actual
capital structure proportions. - Answer-62. True
.63. Projects having higher cash inflows in the early years tend to be less
sensitive to changes in the cost of capital and are therefore often
acceptable at higher discount rates compared to projects with higher cash
inflows that occur in the later years - Answer-63. True
.64. The risk-adjusted discount rate is the rate of return that a project must
earn to maintain or improve the firm's share price. - Answer-64. True
.65. Behavioral approaches for dealing with the risk include adjusted net
present value and risk-adjusted discount rates. - Answer-65. False
