Quiz Ch 09 – Project Categorization for a Firm
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
How could a firm categorize its projects?
How could a firm categorize its projects?
When is the cost of capital equivalent to the cost of equity?
True or false: Adjusting discount rates with a “fudge factor” is more inclined to penalize short-term projects over long-term projects.
True or false: An industry beta from a portfolio of companies in the same industry is more accurate than a single company’s beta estimate.
True or false: Managers can prudently address overly optimistic cash-flow forecasts by making adjustments to the discount rate.
True or false: The after-tax calculation of the weighted average cost of capital (WACC) is given by WACC = (rD) (1 − TC ) (D/V) + (rE) (E/V), with V = D + E.
True or false: The company cost of capital is fitting for investments with equivalent risk to the overall business.
True or false: A pure play refers to a comparable firm exclusively focusing on one activity.
True or false: Projects that possess considerable diversifiable risk typically merit greater company costs of capital.
True or false: The company’s cost of capital is identical to the cost of debt for the firm.