Here is few question... 1. If a firm adopts a large proportion of above-average-risk projects that are not offset by below-average-risk projects a. its cost of capital will rise. b. its risk premium will decline. c. the risk-free rate will increase as more risk is added. d. none of the above 2. Which of the following is/are included in the list of drawbacks to using the Monte Carlo simulation for dealing with risk in capital budgeting? a. Cash flows still have to be estimated subjectively b. Individual cash flows generally don't behave independently. If one cash flow turns out to be less than expected, several other may behave the same way. c. Even after creating a distribution of probably outcomes, it is difficult to know exactly how to interpret the data. d. Both a. and c. are drawbacks. e. All of the above are drawbacks. 3. The probability of a path is the product of all the branch probabilities along it and is called a a. joint probability b. conditional probability c. basic probability d. none of the above 4. In calculating probabilities using a decision tree, which of the following is most correct? a. The probabilities emerging from any node must sum to 1. b. The ultimate probabilities assigned to each of the branches (looking at the right hand side of the tree) must sum to 1. c. The probability assigned to any given branch (looking at the right hand side of the tree) can be no greater than .5. d. Both a. and b. are correct. e. All of the above are correct. 5. A land option contract is considered what type of option? a.expansion option b. investment timing option c. flexibility option d. abandonment option