Problem 1: A financial manager evaluating a new investment opportunity should assess:
- only the cash requirements of the project.
- the risks and returns of the investment without regard to other investments.
- how the project compares with the average project of the firm.
- the resources that the opportunity will consume.
Problem 2: For investments involving significant risk, the cost of capital is equal to the:
- risk-free interest rate plus an appropriate risk premium.
- rate of return on the investment
- NPV of the future income from the investment.
- systematic risk of the investment.