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I need the sure answers for those two questions Please.

1)If a company uses the same discount rate to evaluate all projects,

A) it will become riskier over time, and its value will decline.

B) it will become riskier over time, and its value will rise.

C) it will become less risky over time, and its value will rise.

D) it will become less risky over time, and its value will decline.

E) there is no reason to expect its risk position or value to change.

2) Tropicali’s overall average cost of capital is 10%. Its frozen foods division is riskier than the firm as a whole, its fresh produce division has risk similar to the firm’s, and its institutional foods division has less risk. Tropicali adjusts for both divisional and project risk by adding/subtracting 2 percentage points to/from its corporate cost of capital. The hurdle rate for a low-risk project in the frozen foods division is:

a. 6%.

b. 8%.

c. 10%.

d. 12%.

e. 14%.

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Patrina Schowalter
Patrina SchowalterLv2
29 Sep 2019

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Please guys answer all the questions. I have to turn this in 6 hours. Thanks in Advance.

1)A firm should never undertake an investment if accepting it would increase the firm’s cost of capital.

A)True

B)False

2)If a investment under consideration has beta of zero, its purchase will not affect the firm’s market risk.

A)True

B)Fase

3) A particular project might have highly volatile forecasted cash flows, yet not have high market risk.

A)True

B)False

4)If a firm is considering purchasing an asset (with normal cash flows) whose beta is greater than the current beta of the firm, it should evaluate it using a discount rate greater than the firm’s current cost of capital.

A)True

B)False

5)If a company uses the same discount rate to evaluate all projects,

A)it will become riskier over time, and its value will decline.

B)it will become riskier over time, and its value will rise.

C)it will become less risky over time, and its value will rise.

D)it will become less risky over time, and its value will decline.

E)there is no reason to expect its risk position or value to change.

6)Tropicali’s overall average cost of capital is 10%. Its frozen foods division is riskier than the firm as a whole, its fresh produce division has risk similar to the firm’s, and its institutional foods division has less risk. Tropicali adjusts for both divisional and project risk by adding/subtracting 2 percentage points to/from its corporate cost of capital. The hurdle rate for a low-risk project in the frozen foods division is:

a. 6%.

b. 8%.

c. 10%.

d. 12%.

e. 14%.


Guys this is very Important Please Please make sure of all the answers. Thanks in Advance.

1)The cost of retained earnings can be less than, equal to, or greater than the cost of new common stock, depending on taxes, flotation costs, investors’ attitudes, etc.

A)True

B)False

2) Hilliard Corp. needs to estimate its cost of capital. The company’s CFO has the following information:

The company’s target capital structure is 25% debt and 75% equity; its tax rate is 40%.

Long-term bonds yield 8%; the cost of retained earnings is 12.63%, that of new common stock is 13.36%.

Since the firm expects to have no retained earnings, it plans to issue new common stock.

Hilliard’s weighted average cost of capital is:

a. 10.67%.

b. I l .22%.

c. 11.47%.

d. 12.02%.

e. 12.56%.

3) If a company uses the same discount rate to evaluate all projects,

A) it will become riskier over time, and its value will decline.

B )it will become riskier over time, and its value will rise.

C) it will become less risky over time, and its value will rise.

D )it will become less risky over time, and its value will decline.

E) there is no reason to expect its risk position or value to change.

4) Tropicali’s overall average cost of capital is 10%. Its frozen foods division is riskier than the firm as a whole, its fresh produce division has risk similar to the firm’s, and its institutional foods division has less risk. Tropicali adjusts for both divisional and project risk by adding/subtracting 2 percentage points to/from its corporate cost of capital. The hurdle rate for a low-risk project in the frozen foods division is:

a. 6%.

b. 8%.

c. 10%.

d. 12%.

e. 14%.

Suppose XYZ Industries correctly estimates its WACC at a given point in time and then uses that same cost of capital to evaluate all projects for the next 10 years, then the firm will most likely.

a.

become less risky over time, and this will maximize its intrinsic value.
b.

accept too many low-risk projects and too few high-risk projects.
c.

become more risky and also have an increasing WACC. Its intrinsic value will not be maximized.
d.

continue as before, because there is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital.
e.

become riskier over time, but its intrinsic value will be maximized.

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