1. Which of the following is not a capital budgeting decision?
a. Borrowing money to repurchase common stock in the market
b. Purchasing a customer list form a competitor.
c. Hiring a research chemist for the Research and Development department.
2. Matthew wants to take out a loan to buy a car. He calculates that he can make repayments of $4,000 per year. If he can get a five-year loan with an annual interest rate of 7.5%, what is the maximum price he can pay for the car?
3. A stock’s beta measures the:
a market risk premium on the stock.
b. quantity of firm specific risk an investor must bear
c. quantity of market risk an investor must bear.