This question is intended for personal knowledge, please show solution of work. Question 2 part B.

Question 2. (20 Marks). A. Identify each of the following statements as either True or False, and explain your answers concisely. Note: An answer without supportive explanations scores Zero. a. Information costs both increase the marginal cost of capital and reduce the internal rate of return on investment projects. b. Depreciation expenses involve no direct cash outlay and can be safely ignored in investment project evaluation. c. Investors can expect to be compensated with higher returns for bearing avoidable or unsystematic risk. d. The variance of the portfolio's probability distribution of possible net present values is just the sum of the variances of the individual projects. c. The IRR method will tend to understate the relative attractiveness of the superior investment projects when the opportunity cost of cash flows is below the IRR. f. A failure to adjust expected cash flows for expected inflation biases the calculated NPV downward. (9 Marks) B. The data below describe a three-stock financial market that satisfies the single-index model. Stock Capitalization Beta Mean Return Standard deviation A TZS 3,000,000 1.0 10% 40% B TZS 1,940,000 0.2 2% 30% C TZS 1,360,000 1.7 17% 50% The standard deviation of the market index portfolio is 25%. CS Scanned with CamScanner Page 2 of 6