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Questions and Answers
A company is deciding between investing in Project A with a high initial cost but predictable returns, and Project B with a lower initial cost but uncertain returns. Which factor should be prioritized to make the optimal decision?
A company is deciding between investing in Project A with a high initial cost but predictable returns, and Project B with a lower initial cost but uncertain returns. Which factor should be prioritized to make the optimal decision?
- Evaluating both the potential returns and associated risks, using tools such as sensitivity analysis and scenario planning. (correct)
- Solely focusing on maximizing potential returns without considering associated risks.
- Basing the decision primarily on the length of time required to complete each project.
- Exclusively minimizing the initial investment cost to preserve available capital.
A firm is considering a project with an expected life of 5 years. The initial investment is $2,000,000, and the expected annual cash inflows are $500,000. What analysis will best determine if the project creates value for the company?
A firm is considering a project with an expected life of 5 years. The initial investment is $2,000,000, and the expected annual cash inflows are $500,000. What analysis will best determine if the project creates value for the company?
- Calculate the net present value (NPV) for a discount rate that reflects the project's risk. (correct)
- Calculate the payback period to ensure it is less than 3 years.
- Compute the accounting rate of return (ARR) on the initial investment.
- Estimate the project's internal rate of return (IRR) only.
Given two mutually exclusive projects, Project X with a higher NPV and a lower IRR, and Project Y with a lower NPV but a higher IRR, what is the most appropriate criterion for selecting between them?
Given two mutually exclusive projects, Project X with a higher NPV and a lower IRR, and Project Y with a lower NPV but a higher IRR, what is the most appropriate criterion for selecting between them?
- Select the project that aligns with management's personal preferences.
- Always select Project Y due to its higher internal rate of return.
- Average the NPV and IRR of both and select on the higher number.
- Choose Project X because it maximizes the firm’s value as indicated by its higher NPV. (correct)
Alpha Corp. aims to optimize its capital structure to minimize its weighted average cost of capital (WACC). An increase in the proportion of debt financing would affect WACC in which of the following ways?
Alpha Corp. aims to optimize its capital structure to minimize its weighted average cost of capital (WACC). An increase in the proportion of debt financing would affect WACC in which of the following ways?
A company is evaluating a potential project that requires an initial investment of $1,000,000. The project is expected to generate annual cash flows of $250,000 for the next 6 years. The company's cost of capital is 10%. What is the project's net present value (NPV)?
A company is evaluating a potential project that requires an initial investment of $1,000,000. The project is expected to generate annual cash flows of $250,000 for the next 6 years. The company's cost of capital is 10%. What is the project's net present value (NPV)?
Flashcards
What is Turbolearn AI?
What is Turbolearn AI?
AI systems designed for educational purposes, offering personalized learning experiences.
What is concept atomization?
What is concept atomization?
Breaking down complex subjects into smaller, more manageable concepts for easier understanding.
What is the testing effect?
What is the testing effect?
Actively recalling information from memory rather than passively rereading it.
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Study Notes
- A case study is a research method where a single individual or group is studied in great depth.
- Chorallin and orexin are hormones that increase appetite.
- The three successive phases of general adaptation syndrome comprises alarm reaction, resistance, and exhaustion.
- General Adaptation Syndrome (GAS) refers to the body's response to stress involving alarm, resistance, and exhaustion phases.
- Sequential processing refers to consciously focusing on one aspect of a problem at a time.
- Sequential Processing involves focusing on one thing at a time and one problem at a time.
- Drive Reduction Theory states physiological needs creates a drive which in turn creates behavior.
- Example of Drive Reduction Theory:
- Hunger creates the drive to walk somewhere.
- Needs ---> Drive ---> Behavior
- People who do not want medication should seek a psychologist.
- People who want medication, should seek a psychiatrist.
- Pre-registration encourages researchers to report their findings, even if earlier findings are not replicated.
- Researchers must disclose information regardless of its significance.
- Pre-registration involves detailing all methodology, procedures, and operational definitions and making that information available to the world.
Emotion-Focused Coping
- A strategy to alleviate stress by avoiding or ignoring stressors when change is impossible.
- Involves emotional responses and numbing pain to minimize the problem.
Problem-Focused Coping
- Taking direct steps to confront and minimize the issue.
- Solving the problem directly.
- Generating alternative solutions.
- Ovaries in females and testes in males are part of the endocrine system
- If an organ releases a hormone, it is part of the endocrine system
- Ovaries release estrogen, while testes release testosterone.
Categories of Stressors
- Catastrophes are events like fires and earthquakes.
- Significant Life Changes include getting married, having a child, or starting a new job, which can be positive or negative stressors.
- Daily Hassles: Losing keys and traffic.
- Critical Thinking is questioning everything.
- All or None Response refers to a neuron's reaction of either firing at full strength or not firing at all.
- There is no in between for neuron reactions
- Neuron reactions comprises of excitatory signals vs. inhibitory signals.
- If excitatory signals win, neurons fire.
- If inhibitory signals win, neurons don't fire.
General Adaptation Syndrome (GAS)
- Alarm Reaction is an immediate reaction to a stressful event.
- Example: Being laid off from a restaurant closing due to a COVID-19 shutdown creates a shock reaction.
- The central nervous system consists of the brain and the spinal cord.
Two-Factor Theory of Emotion
- Emotions comprise of Cognitive appraisal and physical arousal.
- Process of Emotions:
- Stimulus
- Physical Arousal
- Cognitive Appraisal (mental processing)
- Emotion
James-Lange Theory of Emotion
- States that arousal precedes emotion.
- Physical reactions occur before the conscious feeling of an emotion.
- Example: Maria's heart racing and palms sweating in a dark alley lead to her realization that she is afraid.
- A clue suggesting James-Lange Theory: "...only after noticing these physical changes does she realize she is feeling afraid."
Experimental Design
- Experimental Group:
- The group that receives the variable being tested.
- Example: Group that receives a new drug to reduce blood pressure.
- The group that receives the variable being tested.
- Control Group:
- The group that does not receive the test variable and that often receives a placebo.
- Example: Group that receives the placebo in the drug trial.
- The group that does not receive the test variable and that often receives a placebo.
- Alpha Waves are the relatively slow brain waves of a relaxed, awake state.
- Four stages of sleep exist.
- Understanding frequency and amplitude is important in relation to alpha waves.
- To trigger an action potential, excitatory signals must exceed inhibitory signals by a minimum intensity or Threshold.
- Threshold: The level of stimulation required to trigger a neural impulse.
- Psychoimmunology involves psychological neuroendocrine processes affecting the immune system.
Self-Transcendence
- Needs for purpose and meaning beyond the self include:
- Belongingness
- Self-esteem
- Self-transcendence
- Self-actualization
- Pessimism is when people expect their options in life to be negative.
- According to Maslow, the need for ________ must be met before people can make concerns with satisfying the need for ________.
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