A+ Graded Paper
BUSI 320 – Corporate Finance | Cost of Capital -
WACC Fully Explained & Worked Solutions +
Questions and Mark scheme
Version: Final 1.1
, portfolio effect - ✔✔Considering the impact of an investment on the overall risk of the firm is known as the
simulation - ✔✔A method of dealing with various economic and financial outcomes using a large number of variables is
known as
True - ✔✔True or false: a decision tree is a graphical comparison resembling the branches of a tree
highly correlated - ✔✔Investments that are Blank______ do little or nothing to diversify risk.
Hint: they are all too similar for diversity to exist between them
reduce the overall risk to firm - ✔✔Investments that are negatively correlated
risk exposure - ✔✔The portfolio effect is concerned with the manner in which various investments impact the overall
_____________ of the firm.
positive - ✔✔A correlation coefficient of +.5 indicates that the investments have a correlation that is
other investments - ✔✔The overall risk of the firm depends on the relationship of a given investment with that of the
company's
lowest possible risk at a given level of return
highest possible return at a given level of risk - ✔✔The primary objective(s) in choosing between various combinations
of investments
correlated - ✔✔The coefficient of correlation measures the extent in which projects are
decrease the overall valuation of the firm
decrease stock valuations - ✔✔Unnecessary or undesirable risk can
risk-return trade off - ✔✔The evaluation of all possible combinations of projects enables management to determine
which will provide the best
BUSI 320 – Corporate Finance | Cost of Capital -
WACC Fully Explained & Worked Solutions +
Questions and Mark scheme
Version: Final 1.1
, portfolio effect - ✔✔Considering the impact of an investment on the overall risk of the firm is known as the
simulation - ✔✔A method of dealing with various economic and financial outcomes using a large number of variables is
known as
True - ✔✔True or false: a decision tree is a graphical comparison resembling the branches of a tree
highly correlated - ✔✔Investments that are Blank______ do little or nothing to diversify risk.
Hint: they are all too similar for diversity to exist between them
reduce the overall risk to firm - ✔✔Investments that are negatively correlated
risk exposure - ✔✔The portfolio effect is concerned with the manner in which various investments impact the overall
_____________ of the firm.
positive - ✔✔A correlation coefficient of +.5 indicates that the investments have a correlation that is
other investments - ✔✔The overall risk of the firm depends on the relationship of a given investment with that of the
company's
lowest possible risk at a given level of return
highest possible return at a given level of risk - ✔✔The primary objective(s) in choosing between various combinations
of investments
correlated - ✔✔The coefficient of correlation measures the extent in which projects are
decrease the overall valuation of the firm
decrease stock valuations - ✔✔Unnecessary or undesirable risk can
risk-return trade off - ✔✔The evaluation of all possible combinations of projects enables management to determine
which will provide the best
