To avoid prejudgment of risk during a simulation analysis, the discount rate used to calculate net present value should be the

Select one:

a. cost of long-term debt.

b. cost of new equity.

c. weighted cost of capital.

d. risk-free rate.

e. required rate of return on projects of similar risk.

Forecasting risk is a concern for financial managers because

Select one:

a. the firm may not be able to correctly project its future financing costs.

b. overly optimistic estimation of future cash flows may lead to incorrect capital budgeting decisions.

c. forecasts by industry analysts may not agree with the firms forecasts of its future revenues.

d. strategic options cannot be included in the capital budgeting decision criteria.

e. the investment decision process should aim to match projected cash flows with actual cash flows.

Which of the following is not a managerial option in the capital budgeting process?

Select one:

a. option to abandon

b. option to wait

c. option to expand

d. strategic option

e. none of the above

Which of the following break-even analyses yields a negative net present value?

I. accounting break-even

II. cash break-even

III. financial break-even

Select one:

a. I only

b. II only

c. III only

d. I and II only

e. I, II, and III