1. For which of the following purposes is the weighted average cost of capital an appropriate tool?
A. Calculating the value of a corporate bond.
B. Calculating the value of a share of stock.
C. Calculating the value of a corporate investment project.
D. All of the above are appropriate uses of the weighted average cost of capital.
2. The net present value of an investment project is zero. Which of the following statements are true?
A. The firm is earning a normal profit on its investment.
B. The firm should not add this project to its investment portfolio because it doesn't add value to the firm.
C. The firm is breaking even on this investment opportunity.
D. None of the above are true.
3. Which of the following statements are true in regard to the measurement of a beta coefficient for a company?
A. Using a sample of 30 days of daily returns to estimate beta is always more accurate than using 30 months of monthly returns.
B. The accuracy of a beta measurement will depend upon the overall stability of the corporate structure during the time for which the beta is estimated.
C. Both a and b are true
D. Neither a nor b are true.