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1. Which of the following statements is FALSE?
A) When using the incremental IRR rule, you must keep track of which project is the incremental project and ensure that the incremental cash flows are initially positive and then become negative.
B) Picking one project over another simply because it has a larger IRR can lead to mistakes.
C) Problems arise using the IRR method when the mutually exclusive investments have differences in scale.
D) When the risks of two projects are different, only the NPV rule will give a reliable answer.
2. You are trying to decide between three mutually exclusive investment opportunities. The most appropriate tool for identifying the correct decision is:
A) NPV.
B) profitability index.
C) IRR.
D) incremental IRR.
The beta of M Simon Inc., stock is 1.4, whereas the risk-free rate of return is 0.06. If the expected return on the market is 0.16, then what is the expected return on M Simon Inc?
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Should you change your asset allocation in an effort to predict shifts in the performance of difficult asset classes? If not, what is the point of asset allocation?
On January 10, Volkswagen agrees to import auto parts worth $8 million from the U.S. The parts will be delivered on March 4 and are payable immediately in dollars. Calculate the number of futures contracts that VW must buy to offset its dollar exchan..
Williams' Paints is weighing a lease versus a purchase of some new machinery. The purchase price is $312,000. The equipment will be depreciated to zero over the 4-year life of the project after which time it is expected to have a resale value of $76,..
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