1. Suppose that investors have not been able to earn excess returns using newly released announcements about the firms. Based on this statement only, which of the following must be correct?
Markets are semi-strong-form efficient, but not weak-form efficient.
Markets are at least weak-form and semi-strong-form efficient.
Markets are definitely strong-form efficient.
Markets are weak-form efficient, but not semi-strong-form efficient.
Markets are semi-strong-form efficient, but not weak-form efficient.
2. Which capital budgeting decision rule does not consider all of the project's free cash flows?
a. Discounted payback period
b. Profitability index
c. Modified internal rate of return
d. Net present value
3. Which of the following is not generally included in the terminal cash flow for a project?
a. liquidation of net working capital
b. opportunity cost
c. the cost of the machine
d. operating cash flows