Question

I1. True or False (20 points, 2 point each) No. 1. Marginal cost is based on the principle that an additional unit of production will only entail an increase in the fixed costs and that the variable costs will not be affected. 2. The greater the balance you have in your account, the slower your savings will grow 3. In case of capital rationing, we should accept project with the highest positive NPV 4. Interest Rate measures the coupon payment as a percentage of the bond's face value S. As long as investors agree about a firm's prospects, they will also agree on the value 6. If investors believe a company will have the opportunity to make every profitable The interest rate is fixed when the bond is issued. of the stock. investment in the future, they will pay more for the company's stock today current share price, the growth rate must exceed the discount rate. today and earn interest on it. draw up a detailed proposal setting out particulars of the project, cash-flow 7. When we use the Constant-Growth Dividend Discount Model to calculate the 8. Money today is worth more than money in the future because you can invest money 9. In order to have a permission to go ahead with your investing project, you need to forecasts, and present value calculation, all these are about Capital Budget 10. The decisions rule for investment timing is to choose the investment date that produces the highest net present value today.

Answer 1

1)	FALSE
	Fixed costs will not increase; only variable cost will.
2)	FALSE
	Greater the balance, faster the savings.
3)	TRUE
4)	TRUE
5)	TRUE
6)	TRUE
7)	FALSE
8)	TRUE
9)	TRUE
10)	TRUE