If you are choosing bet ween the following projects because they are mutually ex

Question

If you are choosing bet ween the following projects because they are mutually exclusive which would you choose? A. NPV 50,001 IRR 8% C. NPV 49,000 IRR 18% E. none of the above B. NPV 50,000 IRR 9% D. All of the above

If our Wacc is 9% and the risk free rate is 1.2% and our company is considering an oil exploration project in Alepo, Syria we would use what as our discount rate to calculate NPV? A. 1.2% plus the appropriate risk premium C. 9 B. 4.20% divided by the risk coefficient D. 9% multiplied by the exchange rate E. None of the above

The Wacc tells us? A. The appropriate rate of return on an investment of average risk B. The expected rate of return for a company participating in regular actvities C. The required rate of return on investments that don’t pose abnormal volatility D. All of the above E. None of the above

If we have paid dividends 0f 3.00, 3.30 and 3.63 per year and our stock price is 54.00. What is the expected return on the stock? A. .074 C. .07380 E. none of the above B. .1378 D. .0285

Explanation / Answer

If you are choosing between the following projects because they are mutually exclusive which would you choose?

A. NPV 50,001 IRR 8%

The decision will based on NPV. Higher the NPV greater are the chances of project selection.

If our Wacc is 9% and the risk free rate is 1.2% and our company is considering an oil exploration project in Alepo, Syria we would use what as our discount rate to calculate NPV?

A. 1.2% plus the appropriate risk premium

Risk Premium will include exchange rate risks, country specific risks and other risks associated with our firm.

The Wacc tells us?

B. The expected rate of return for a company participating in regular actvities

If we have paid dividends 0f 3.00, 3.30 and 3.63 per year and our stock price is 54.00. What is the expected return on the stock?

A. .074

Expected Dividend = 1.1*3.63 = $3.993

Expected Return = Expected Dividend/Stock Price = 3.993/54 = 0.07394

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