CEU Exam: How to Supplement Project Proposals with Improved Economics

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Question 1 *

True or False: The core principle that underlies the cost of capital is if you take on more risk, you only want to do that if you can expect to make a higher return.

True
False
Question 2 *

What is the long-run expected return on the S&P 500 today?

4-6%
7-8%
9-10%
11-13%
14-16%
Question 3 *

In the sunscreen vendor and umbrella vendor example, what does a potential hurricane represent to an original investor?

Diverse risk
Competitive risk
Systematic risk
Global risk
None of the above
Question 4 *

A diversified investor worries about systematic macroeconomic risks such as which of the following:

GDP growth
Interest rates
Stock market collapse
All of the above
None of the above
Question 5 *

According to the presenter, at its core, what is main reason we conduct financial analysis?

Maximizing rates of return
Creating value
Limit risks
Analyze competitive advantages
None of the above
Question 6 *

What are the two groups of investors?

Present investors and new investors
Old investors and managers
Managers and employees
Capital raisers and stock holders
None of the above
Question 7 *

True or False: The objective of a management team or firm is to serve the company’s owners.

True
False
Question 8 *

What type of gain involves an opportunity to invest in a project that offers more than the cost of capital and generates an immediate capital gain for investors?

Double-down gain
Tri-fund gain
Windfall gain
Limited-risk gain
None of the above
Question 9 *

What are the three components of economic analysis?

Rate of return, risk, investment scale
Rate of return, debt equity, limited risk
Capital gain, lower risk, shared inventory
Competitive stock pricing, percentage return on initial risk, investment scale
None of the above
Question 10 *

What is the name of this equation: (return-cost of capital) x scale?

Risk-value added
Economic value added
Investment and limited risk assessment
Rate of return
None of the above
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