13. Risk-averse managers will generally require _____ return from risky investme

13. Risk-averse managers will generally require _____ return from risky investments.
a. Lower
b. Zero
c. Higher
d. Negative
14. The concept of risk can be incorporated into the capital budgeting process by using higher discount rates for riskier investments.
a. True
b. False
15. If risk is to be analyzed in a qualitative way which is the least risky?
a. New equipment
b. New market
c. Repair of old machinery
d. New product in a foreign market
##Best Technology Corp. is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given.
Possible
Market Reaction Sales
in Units
Probabilities
Low response 20 .10
Moderate response 40 .20
High response 65 .40
Very high response
80 .30
16. What is the expected value of unit sales for new product?
a. 20
b. 30
c. 45
d. 60
17. What is the standard deviation of unit sales?
a. 370
b. 160
c. 19.2
d. 5.8
18. Project A has an expected return of $1000 and a standard deviation of $590. Project B has expected return of $3000 and a standard deviation of $750. Using coefficient of variation which has a lower risk?
a. Project A because coefficient of variation is higher.
b. Project A because coefficient of variation is lower.
c. Project B because coefficient of variation is higher.
d. Project B because coefficient of variation is lower.
19. A company with a beta of 1.50 is considered to have lower level of risk than the stock market in general.
a. True
b. False
20. A company is considering the purchase one of two companies. Both of these companies have an expected return of 15% with the same standard deviation of returns. Company 1 has a positive correlation of returns with the acquiring company while company 2 has a negative correlation. Which company should the acquiring company purchase if it must purchase one of them?
a. Company 1 because it reduces risk
b. Company 1 because it increases return
c. Company 2 because it reduces risk
d. Company 2 because it increases return