Reference no: EM132736706

Problem 1. Which one of the following statements is false?

A. The net present value is positive when the required return exceeds the internal rate of return.
B. If the initial cost of a project is increased, the net present value of that project will decrease.
C. If the internal rate of return equals the required return, the net present value will equal zero.

Problem 2. An investor has the following information:

According to the capital asset pricing model (CAPM), an increase in the expected market return will have the largest effect on the expected return of

A. Security 1.
B. Security 2.
C. Security 3.

Problem 3. Which one of the following statements is true regarding both the percentage return and the dollar return on an equity investment?

A. The dollar return is less accurate than the percentage return because the dollar return includes dividend income while the percentage return does not.
B. Without the size of an investment, the percentage return has more informational value than the dollar return.
C. Dollar returns must either be zero or a negative value while percentage returns can be only negative or positive.