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NEW QUESTION 27
Company A has a Weighted Average Cost of Capital (WACC) of 12 percent. They are evaluating four different projects/investments with financial flows as described below. Available funds are limited, so they can only pursue one of the investment alternatives. Each project/investment involves an initial outflow of $1,000,000 and has an eight year life.

Which project should they select?

• A. Project 3
• B. Project 2
• C. Project 4
• D. Project 1

Answer: C

NEW QUESTION 28
During a prolonged recession, a hotel chain sees reservations at one of its locations decline by five percent. The chain soon decides to close that location. Why would a small change in capacity utilization have this effect?

• A. Closing the location will allow the hotel chain to recover some of its sunk costs.
• B. Fixed costs are too high for the hotel to remain profitable at this decreased quantity.
• C. Demand for hotel rooms in this location is extremely elastic.
• D. The consumers most affected by the recession are generally those with lower willingness to pay.

Answer: B

NEW QUESTION 29
A student is interested in which factors affect the U.S. poverty rate and develops a linear regression model. The student uses poverty rate in all 50
U.S. states and Washington D.C. as the dependent variable and wants to relate it to the following variables:
The unemployment rate
The percent of the adult (over 25) population with at least a bachelor's degree
The percent of the population without health insurance
The percent of the adult (over 25) population without a high school diploma or equivalent
The percent of households with children under 18 run by a single mother
The student collects data from each state and Washington D.C. for the year 2012 and runs the regression in Excel. The results of this regression are given below.

Based on these results, select the independent variables that have a coefficient that is statistically significant at the 5% level. (Select all that apply.)

• A. Percent of High School Dropouts
• B. Unemployment Rate
• C. Percent of Population Uninsured
• D. Bachelor's Degree or Higher
• E. Percent of Single Mother Households

Answer: A,D

NEW QUESTION 30
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