ECO 550 Final Exam (36 Questions with Correct Answers)
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Question 34<br />
Capital expenditures:<br />
Answer<br />
are easily reversible<br />
are forms of operating expenditures<br />
Affect long-run future profitability<br />
Involve only money, not machinery<br />
Question 35<br />
The ____ method assumes that the cash flows over the life of the project are reinvested at the<br />
____.<br />
Answer<br />
net present value; computed internal rate of return<br />
internal rate of return; firm’s cost of capital<br />
net present value; firm’s cost of capital<br />
net present value; risk-free rate of return<br />
Question <strong>36</strong><br />
The weights used in calculating the firm’s weighted-average cost of capital are equal to the<br />
proportion of debt and equity ____.<br />
Answer<br />
used to finance the project<br />
used to finance the projects undertaken last year<br />
in the industry average capital structure<br />
in the firm’s target capital structure
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