1.A unique difficulty in estimating the appropriate discount rate for foreign ca

Question

1.A unique difficulty in estimating the appropriate discount rate for foreign capital budgeting projects is

A.High interest rates

B.Interest rate parity

C.Political risk

D.Default risk

2.For any interest rate to the left of where two NPV profiles cross for two mutually exclusive projects,

A.NPV and IRR will make the same accept/reject decision.

B.IRR will choose the right project but NPV will choose the wrong project.

C.NPV will choose the right project but IRR will choose the wrong project.

D.Payback will choose the right project but NPV will choose the wrong project.

3.What portfolios might have lower total risk?

A.Apple, Google, and Microsoft

B.General Motors, Ford, and Honda

C.Newmont Mining, Disney, and General Electic

D.Exxon-Mobile, Shell, and Chevron

4.What is the payback statistic for a project with yearly cash flows of -10,000; 2,500; 3,500; 5,000; 4,000; 2,000 when the company faces a 10 percent cost of capital?

A.2.8 years

B.3.56 years

C.3.0 years

D.8.2 years

5.Direct foreign investment by foreign firms into the United States since 1980 has usually been ________ than that of U.S. firms investing abroad.

A.about the same

B.less

C.greater

D.half

A.High interest rates

B.Interest rate parity

C.Political risk

D.Default risk

Explanation / Answer

1. B.Interest rate parity

2. C.NPV will choose the right project but IRR will choose the wrong project.

3. D.Exxon-Mobile, Shell, and Chevron

4. B.3.56 years

5. C.greater

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