Real estate for capital budgeting purposes

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Reference no: EM131348243

1. If a firm has the option of selling some raw land to another firm or utilizing it to build a new factory, then if the firm chose to build the factory how should it handle the lost opportunity to sell the real estate for capital budgeting purposes?

A. Ignore it.

B. Include it as an opportunity cost.

C. Include half of it as additional revenue for the project.

D. Only

2. Which of the following statements is NOT true about the CDS spread?

a) Other things equal, CDS spread should be higher is the recovery rate is higher.

b) Other things equal, CDS spread should be higher if the yield spread of the bonds issued by the reference entity is higher.

c) CDS spreads generally go up when the macroeconomy is bad.

d) CDS spread should be negatively correlated with the stock price of the refence comp.

Reference no: EM131348243

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