Which of the following statements is correct hide

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Which of the following statements is correct?<< HIDE ANSWERSAAn externality is a situation where a project would have an adverse effect on some other part of the firm’s overall operations. If the project would have a favorable effect on other operations, then this is not an externality BAn example of an externality is a situation where a bank opens a new office, and that new office causes deposits in the bank’s other offices to decline CThe NPV method automatically deals correctly with externalities, even if the externalities are not specifically identified, but the IRR method does not. This is another reason to favor the NPVDBoth the NPV and IRR methods deal correctly with externalities, even if the externalities are not specifically identified. However, the payback method does notEIdentifying an externality can never lead to an increase in the calculated NPV
QUESTION:8[QUESTION BANK ID:269435]TYPE:MULTIPLE CHOICECORRECTWhich of the following factors should be included in the cash flows used to estimate a project’s NPV? << HIDE ANSWERS
QUESTION:9[QUESTION BANK ID:269606]TYPE:MULTIPLE CHOICECORRECTSchalheim Sisters Inc. has always paid out all of its earnings as dividends; hence, the firm has no retained earnings. This same situation is expected to persist in the future. The company uses the CAPM to calculate its cost of equity, and its target capital structure consists of common stock, preferred stock, and debt. Which of the following events would reduce its WACC? << HIDE ANSWERS
QUESTION:10[QUESTION BANK ID:269450]TYPE:MULTIPLE CHOICECORRECTThe "trade-off theory" of capital structure suggests that<< HIDE ANSWERS
QUESTION:11[QUESTION BANK ID:269439]TYPE:MULTIPLE CHOICECORRECTWhich of the following statements is correct? << HIDE ANSWERSAFirms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratiosBOne advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors likeCAn increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MMDIf the “clientele effect” is correct, then for a company whose earnings fluctuate, a policy of paying a constant %age of net income will probably maximize the stock priceEStock repurchases make the most sense at times when a company believes its stock is undervalued

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