Cyrus Cypress Evaluates All Capital Budgeting Projects with Its Normal

question 96

Multiple Choice

Cyrus Cypress evaluates all capital budgeting projects with its normal, or average, required rate of return (k) , regardless of the risk associated with the projects.If Cyrus is currently examining projects that are significantly riskier than the existing assets of the firm, the capital budgeting decisions that the firm makes could be

• A)correct.
• B)incorrect because acceptable projects might be rejected when they should be accepted.
• C)incorrect because unacceptable projects might be accepted when they should be rejected.
• D)Both a and b are correct answers.
• E)Both a and c are correct answers.

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