Answer Happy

5. A firm is considering the purchase of an asset whose risk is
lower than the current risk of the firm, based on any method for
assessing risk. In evaluating this asset, the decision maker
should
a. Increase the IRR of the asset to reflect the greater
risk.
b. Lower the cost of capital used to evaluate the project to
reflect the lower risk of the project.
c. Reject the asset, since its acceptance would increase the
risk of the firm.
d. Ignore the risk differential if the asset to be accepted
would comprise only a small fraction of the total assets of the
firm.
e. Increase the cost of capital used to evaluate the project to
reflect the higher risk of the project.
6. The relationship between the two key elements of the constant
dividend growth model is
that Dt+1 is less than the prior one,
Dt.
that the growth rate is always positive and greater than the
discount rate.
assumes the growth rate is always more than the discount
rate.
the long run growth rate is postive
Both B and D.
none of the above