finance final

a typical measure for the risk free rate of return is the

US Treasury bill rate

a stock with a beta of 1 has systematic or market risk equal to the typical stock in the marketplace

true

beta represents the average movement of a company's stock returns in responses to a movement in the market returns

true

the benefits of diversification occur as long as the investments in a portfolio are not perfectly positively correlated

true

which of the following types of risks is diversifiable

unsystematic, or company-unique risk

If a project is acceptable using the net present value criteria, then it will also be acceptable under the less stringent criteria of the payback period.

false

The profitability index is the ratio of the company's net income (or profits) to the initial outlay or cost of a capital budgeting project.

false

higher flotation costs will result in all of the following except

higher cost of retained earnings

cost of capital is

the rate of return that must be earned on additional investment if firm value is to remain unchanged

If a firm imposes a capital constraint on investment projects, the appropriate decision criterion is to select the set of projects that has the highest positive net present value subject to the capitalconstraint.

true

NPV is the most theoretically correct capital budgeting decision tool examined in the text.

true