1. In estimating cash flows, the firm should include:
a. effects on other parts of the company.
b. fixed costs.
c. a and c
d. a, b, and c
e. opportunity costs.
2. Suppose a firm builds a plant with more space than the firm currently needs. What type of real option best describes the firm’s behavior?
a. A land option contract
b. An expansion option
c. A contraction option
d. An abandonment option
3. When a similar company can't be found to use in estimating a divisional beta, the division's own records can sometimes be used instead. This method is called:
a. financial accounting.
b. pure play.
c. CAPM.
d. accounting beta.