1. Suppose Acme Industries correctly estimates its WACC at a given point in time and then uses that same cost of capital to evaluate all projects for the next 10 years, then the firm will most likely
a. Become less risky over time, and this will maximize its intrinsic value.
b. Accept too many low-risk projects and too few high-risk projects.
c. Become more risky and also have an increasing WACC.Its intrinsic value will not be maximized.
d. Continue as before, because there is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital.
2. Which of the following statements is NOT a principle in finance?
More money is preferred to less
The money today is better than the money tomorrow
Less risky assets are more valuable than riskier assets
If you want to be a CEO, you have to be risk chasing
None of the above