Fundamentals of Financial Management, Third Edition

OBJECTIVE-TYPE QUESTIONS

1. Mark true or false.
   1. Nominal required rate of return is the product of real required rate of return and the inflation rate.
   2. Hard capital rationing position means a situation where capital constraints are never violated.
   3. Certainty equivalent approach means adjustment of risk factor in the denominator of the NPV rule.
   4. Managerial options are also known as real options as they influence the real assets.
   5. Return-risk ratio is the key factor in selecting an investment portfolio.
2. Choose the most suitable answer.
   1. In “soft” form of capital rationing, capital constraints are:
      • never violated
      • often violated
      • rarely violated in very specific cases
   2. Differing economic life of proposals matters if:
      • proposals are independent
      • proposals ...