Investment Assignment


Investment Assignment

5. Two financial assets A and B are expected to give the following expected returns: A pays a ret -10S (100 % probability); B pays either +20$ (10 % probability) or +70S (90% probability):

a) A has no risk.

b) B has no risk

c) A and B are risky assets, but B is riskier than A

d) A and B are risky assets, but A is riskier than B

6. If the Government announces today an increase in the Corporate tax starting next year:

a) The valuation of the 5-years investment project the company calculated yesterday will change.

b) The valuation of the 5-years investment project the firm invested in last year will change.

c) Generally, a higher Corporate Tax relates to a lower Net Present Value

d) All of the above.

7. Depreciation:

a) Represents a cash outflow.

b) Reduces taxable incomes.

c) Increases taxes

d) All of the above

8. What investments in real assets should the firm make? Investments where

a) The value is higher than the cost.

b) The project is worth more than the capital required to undertake it.

c) The company spends money now because is expecting higher discounted net cash flows from the future

d) All of the above.

9. In calculating the value of a project:

a) One safer euro is worth more than a risky

b) One euro today is worth more than one euro tomorrow.

c) We are interested in the difference between the cash flows of the firm with the project and the cash flows of the firm without the project.

d) All of the above one. Get Finance homework help today

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