1. A company in financial distress tends to accept risky projects with negative NPV. This is
a) Milking the property b) underinvestment problem c) excessive risk taking problem d) dilution problem
2. Suppose you just won the state lottery, and you have a choice between receiving $2,575,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.
6.41%
7.37%
4.74%
7.44%
7.13%