Corporate Investment and Finance questions

Oct 20th, 2015
Business Finance
Price: $5 USD

Question description

1.  True --False Assume a risk averse investor and two investments. If project A has an expected return of 10% and project C has an expected return of 12%, the risk averse investor would be indifferent between the two projects. 

2.  True --False Portfolios that offer the lowest expected return for a given variance or standard deviation are known as efficient portfolios. 

3.  True --False Investors are mainly concerned with those risks that cannot be eliminated through diversification. 

4.  True --False Beta measures the marginal contribution of a stock to the risk of an undiversified portfolio. 

5.  True --False According to CAPM, all investments should plot along the security market line and the vertical distance of actual return from the line is known as gamma. 

6.  True --False The company cost of capital is the correct discount rate for any project undertaken by the company. 

7.  True --False Each project should be evaluated at its own opportunity cost of capital. The true cost of capital depends on the use to which the capital is put. 

8.  True --False The company cost of capital is the cost of debt of the firm. 

9.  True --False The company cost of capital could be the cost of equity in an all equity financed firm. 

10.  True --False It is generally more accurate to use an "industry beta" for a portfolio of companies in the same industry than to use the beta for a single company in estimating the cost of equity capital. 

11.  True --False Generally for long term project evaluation, the value to use for the risk-free rate is the short-term Treasury bill rate.  

12. True --False Most of the beta is in the industry, and firms with high operating leverage tend to have higher asset betas. 

Tutor Answer

(Top Tutor) Doctor Gabler
School: Purdue University

Studypool has helped 1,244,100 students

Review from student
" Thanks, good work "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1820 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors