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Capital budgeting projects

1. Capital budgeting projects include all of the following with the exception of:
a. The purchase of a six-month treasury bill.
b. The expansion of a plant.
c. The development of a new product.
d. The replacement of a piece of equipment.

2. Asymmetric information represents a market situation in which:
a. All parties to a transaction possess less than full information.
b. One party in a transaction has more information than the other party.
c. Some information possessed by the parties in a transaction may be false.
d. A zero-sum game exists.

3. Moral hazard is the:
a. Outcome of a Prisoner's Dilemma.
b. Result of market signaling.
c. Risk associated with a Dutch auction.
d. Risk that one party to a contract may alter its post-contract behavior to the detriment of another party.

4. If $1,000 is placed in an account earning 8% annually, the balance at the end of seven years will be:
a. $1,080.
b. $1,560.
c. $2,000.
d. $1,714.

Solution Preview

1. Capital budgeting projects include all of the following with the exception of:
a. The purchase of a six-month treasury bill.

2. Asymmetric information represents a market situation in which:
b. One party in a transaction has more information than the other ...

Solution Summary

Capital budgeting projects and other questions are posed.

$2.19