FINA 365 Final Exam with Questions and Answers, Exams of Finance

FINA 365 Final Exam with Questions and Answers How do you determine the appropriate discount rate for use in evaluating an investment's worth? We need to... ANSWER✓✓ Estimate the investment's riskiness What is cost of capital? ANSWER✓✓ The minimum expected return on investment must generate "required return" Market rate on a financial asset of equal risk Also means cost of money, appropriate discount rate, required return Rational investors like _____ and dislike ______ and ______ ANSWER✓✓ They like returns. They dislike risk and uncertainty Investors would like to be compensated for bearing higher _______ by requiring higher _______ ANSWER✓✓ risks; expected returns Cost of capital depends on what? ANSWER✓✓ How funds are raised and how much risk is in the cash flows An investment project can be financed by issuing ______ or ______ ANSWER✓✓ debt or equity Cost of capital is ______ for debt and equity due to ______ riskiness ANSWER✓✓ different; different