Which of the following are true?
A project's IRR is independent of the firm's cost of capital. In other words, a project's IRR doesn't change with a change in
☐ A stock with a beta equal to -1.0 has zero systematic (or market) risk.
Bad managerial judgments or unforeseen negative events that happen to a firm are defined as "company-specific," or "unsyst
effects on investment risk can in theory be diversified away.
A stock's beta is more relevant as a measure of risk to an investor who holds only one stock than to an investor who holds a
A basic rule in capital budgeting is that if a project's NPV exceeds its IRR, then the project should be accepted.
All other things held constant, the present value of a given annual annuity decreases as the number of periods per year
As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always equal to or greater than the
deposit (or loan).
☐ An increase in the firm's WACC will decrease projects' NPVs, which could change the accept/reject decision for any po
such a change would have no impact on projects' IRRs. Therefore, the accept/reject decision under the IRR method is
capital.
An individual stock's diversifiable risk, which is measured by its beta, can be lowered by adding more stocks to the por
held.
Conflicts between two mutually exclusive projects occasionally occur, where the NPV method ranks one project high
the other one first. In theory, such conflicts should be resolved in favor of the project with the higher positive NPV.
