FNAN 522 FINAL EXAM EXAM2023 - QUESTIONS AND CORRECT ANSWER UPDATEd

FNAN 522 FINAL EXAM EXAM2023 - QUESTIONS AND CORRECT ANSWER UPDATEd. The risk-adjusted discount rate (RADR) is the most theoretically correct method and is the rate of return that must be earned on a given project to compensate the firm's owners for risk, thereby resulting in the maintenance or improvement of share price. True or False. - CORRECT ANSWER False. 11. Sensitivity analysis is a statistically based approach used in capital budgeting to get a feel for risk by applying predetermined probability distributions and random numbers to estimate risky outcomes. True or False. - CORRECT ANSWER False. 12. The higher the risk of a project, the higher its risk-adjusted discount rate and thus the lower the net present value for a given stream of cash inflows. True or False. - CORRECT ANSWER True. 13. If the NPV is a negative 50,000 and the discount rate is 12%, the IRR is... - CORRECT ANSWER ...less than 12%. 14. An increase in sales and/or profits means there is also an increase in cash on the balance sheet. True or False. - CORRECT ANSWER False. 15. The goal of the firm is to maximize profits. True or False. - CORRECT ANSWER False 16. Book value per share is of greater concern to the financial manager than the market value. True or False. - CORRECT ANSWER False. Market Value is most important. 17. is the systematic process of evaluating and selecting long-term investments consistent with the firm's goal of owner wealth maximization. a) Recapitalizing Assets, b) Capital Budgeting, c) Ratio Analysis, or d) restructuring debt - CORRECT ANSWER b) Capital Budgeting 18. The underlying cause of conflicts in ranking for projects by IRR and NPV methods is.... - CORRECT ANSWER the reinvestment rate assumption regarding the cash flows 19. Comparing NPV and IRR analysis: a) may result in conflict with mutually exclusive projects, b) may result in conflict with independent projects, c) will always result in conflict with mutually