5) A(n) allows management to avoid or minimize losses on projects that turn bad. A) abandonment option B) growth option C) timing option D) put option 6) Which of the following proposed projects should be accepted for the upcoming year since only $6 million is available for the next year's capital budget. What is the total NPV of the projects that should be accepted? Cost (millions) Project 1.75 4.5 3.75 1.25 0.50 NPV(millions) 0.80 0.52 0.69 0.95 0.25 0.25 A) A, B, & F, total cost-$5.5 million; Total NPV - $1.57 B) F, B, & D; total cost - $6 million; Total NPV - $1.72 C) E, F, & D: total cost $5.5 million; Total NPV = $1.45 D) A, E, & F; total cost-$5 million; Total NPV - $1.3 7) Which of the following is a reason why equity capital is considered riskier than debt capital? A) Equity capital has a higher priority claim against assets and earnings. B) Equity capital requires regular periodic payments in the form of dividends. C) Equity capital expects dividend payments which are not tax-deductible. D) Equity capital remains invested in a firm indefinitely. 8) The objective of is to select the group of projects that provides the highest overall net present value and does not require more dollars than are budgeted. A) capital rationing B) scenario analysis C) real options D) sensitivity analysis 9) The EBIT-EPS approach to capital structure proposes that an optimal capital structure be selected which A) maximizes the weighted average cost of capital B) minimizes the cost of debt C) maximizes the EPS D) minimizes dividends in the degree of financial leverage. 10) A decrease in fixed operating costs will result in A) a decrease B) an increase C) no change D) an undetermined change