FIN 534 Week 7 Quiz 6

This file of FIN 534 Week 7 Quiz 6 shows the solutions to the following points:

1. Which of the following statements is CORRECT?2. Which of the following statements is CORRECT?3. Assume that the economy is in a mild recession, and as a result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%. Project S has an IRR of 20% while Project L’s IRR is 15%. The projects have the same NPV at the 8% current WACC. However, you believe that the economy is about to recover, and money costs and thus your WACC will also increase. You also think that the projects will not be funded until the WACC has increased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?4. Four of the following statements are truly disadvantages of the regular payback method, but one is not a disadvantage of this method. Which one is NOTa disadvantage of the payback method?5. Which of the following statements is CORRECT?6. Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.7. Which of the following statements is CORRECT?8. Which of the following statements is CORRECT?9. Which of the following statements is CORRECT?10. Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.11. Which of the following statements is CORRECT?12. Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.13. Assume that the economy is enjoying a strong boom, and as a result interest rates and money costs generally are relatively high. The WACC for two mutually exclusive projects that are being considered is 12%. Project S has an IRR of 20% while Project L’s IRR is 15%. The projects have the same NPV at the 12% current WACC. However, you believe that the economy will soon fall into a mild recession, and money costs and thus your WACC will soon decline. You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions. Under these conditions, which of the following statements is CORRECT?14. Which of the following statements is CORRECT?15. Which of the following statements is CORRECT?16. The relative risk of a proposed project is best accounted for by which of the following procedures?17. Which of the following statements is CORRECT?18. Rowell Company spent $3 million two years ago to build a plant for a new product. It then decided not to go forward with the project, so the building is available for sale or for a new product. Rowell owns the building free and clear–there is no mortgage on it. Which of the following statements is CORRECT?19. Which of the following should be considered when a company estimates the cash flows used to analyze a proposed project?20. Which of the following statements is CORRECT?21. A company is considering a new project. The CFO plans to calculate the project

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