Question

True or False

41. There are only two things a company can do with its profits, pay dividends and retain profits.

42.The investment cash flows for a project typically carry a positive sign.

43. A positive of NPV is its currency units.

44.A project uses the WACC of the country where the capital is raised regardless of where the project is built.

45.The CAPM approach is too difficult to be used often as a project's cost of equity.

47.Flotation costs are a measure of how much it costs to raise funds.

48.A board of directors oversees executives in a firm.

50. WACC is a measure of a company's marginal cost of new funds.

Answer 1

41. False. ( It can also be used to diversify the company's process through marketing , Search Engine Optimization etc.)

42. False. ( Investment Cash flows of a project carry's both positive and negative signs.

43. True. (A positive of NPV is its current units on a specific financial year)

44. False. (A project should use the WACC of the company where the capital is raised by analysing its previous projects not its country's WACC)

45. False. ( CAPM is used to identify a project's cost of equity where risk free rate of return, Beta, market risk are given and it is not at all difficult).

47. True. ( Because Floatation cost is the fees assosciated with public companies issuing securities to raise money. Thus Floatation cost is a measure of how much it costs to raise funds.)

48. True. ( Board of Directors can oversees CEO and corporate performance with an eye to the company's profitability and its long term health)

50. True. ( WACC is also known as marginal cost of capital and it is estimated by computing the marginal cost of each of the various sources of capital for the company and then taking a weighted average of these costs.)