Question 11 5 5 pts a firm is considering a new

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Question 115 / 5 ptsA firm is considering a new project whose risk is greater than the risk of thefirm’s average project, based on all methods for assessing risk. In evaluatingthis project, it would be reasonable for management to do which of thefollowing?Increase the estimated IRR of the project to reflect its greater riskIncrease the estimated NPV of the project to reflect its greater riskReject the project, since its acceptance would increase the firm’s riskIgnore the risk differential if the project would amount to only a small fractionof the firm’s total assetsCorrect!
Increase the cost of capital used to evaluate the project to reflect its higher-than-average riskQuestion 125 / 5 ptsWhich of the following statements is correct?
Question 135 / 5 ptsWhich of the following statements is correct?
Sunk costs must be considered if the IRR method is used but not if the firmrelies on the NPV methodA good example of a sunk cost is a situation where a bank opens a newoffice, and that new office leads to a decline in deposits of the bank’s otherofficesCorrect!A good example of a sunk cost is money that a banking corporation spentlast year to investigate the site for a new office, then expensed that cost fortax purposes, and now is deciding whether to go forward with the projectIf sunk costs are considered and reflected in a project’s cash flows, then theproject’s calculated NPV will be higher than it otherwise would beQuestion 145 / 5 ptsWhich of the following should be considered when a company estimates thecash flows used to analyze a proposed project?
The company spent and expensed $10 million on a marketing study beforeits current analysis regarding whether to accept or reject the project

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Term
Spring
Professor
MACHUCA

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