Quiz Ch 12 – T/F Project Evaluation and Security Market Line
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: To be considered, a project’s return should fall under the security market line.
True or false: To be considered, a project’s return should fall under the security market line.
True or false: Companies with a low credit rating, when investing in low-risk projects, may find it necessary to apply a relatively higher cost of capital when discounting cash flows.
True or false: The cash flows from a project should be discounted at a high cost of capital when a low-risk company invests in a high-risk project.
True or false: It may be advisable for the company to establish a greater discount rate to account for compensation when a project bears the risk of unfavorable outcomes.
True or false: The security market line sets a standard for investments influencing investors to opt for alternatives only if they offer similarly promising prospects as those on the line.