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A firm is considering the purchase of an asset whose risk is greater than the current risk of the firm, based on any method for assessing risk. In evaluating this asset, the decision maker should
Increase the IRR of the asset to reflect the greater risk.
Increase the NPV of the asset to reflect the greater risk.
Reject the asset, since its acceptance would increase the risk of the firm.
Ignore the risk differential if the asset to be accepted would comprise only a small fraction of the total assets of the firm.
Increase the cost of capital used to evaluate the project to reflect the higher risk of the project.
Assume a stock's risk and expected rate of return are plotted on a graph where the y-axis is required rate of return and the x-axis is risk. Under which of the following conditions is the stock most likely to be sold (if owned) or not purchased?
The Holyoke Corporation has 120,000 shares outstanding with a current market price of $8.10 per share. The company needs to raise an additional $36,000 to finance new expenditures, and has decided on a rights issue. The issue will allow current stock..
Listen or review the slides on Health Insurance Exchanges. In general, what is the main difference in opinion of the House and the Senate? Whose viewpoint do you agree with? How do these viewpoints impact financial challenges facing health care le..
In the hope of high returns, venture capitalists provide funds to finance new companies. However, potential competitors and structures of the market into which the new firm enters are extremely important in realization of profits.
Which one of the following constitutes a valid reason/condition for a company to consider shifting away from pursuit of a differentiation strategy keyed to assembling and selling top-quality entry-level cameras at premium prices?
_____use nonconvertible preferred stock extensively as a means of long-term financing.
Juanita has an opportunity to invest in her friend's clothing store. The initial investment is $10,700 and the expected annual cash flows thereafter are as follows: {$400; $500; $1,000; $2,000; $2,000; $4,000; $4,000}. What is Juanita's IRR on this i..
The contract size for platinum futures is 50 troy ounces. Suppose you need 500 troy ounces of platinum and the current futures price is $1,265 per ounce. How many contracts do you need to purchase? How much will you pay for your platinum? What is you..
Security National Bank is quoting 1-year certificates of deposit with an interest rate of 6% compounded semi annually. Joe Saver purchased a $5,700 CD. What is the CD’s effective rate (APY)?
The Total assessed property value in River city is $106,000,000. budget planners have determined that $7,663,800 will be required to provide all government services next year. What tax rate is required to meet the budgetary demands?
A college received a contribution to its endowment fund of $2 million. They can never touch the principal, but they can use the earnings. At an assumed interest rate of 9.5 percent, how much can the college earn to help its operations each year?
A firms dividends have grown over the last several years. 3 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $4. What was the average annual growth rate of dividends for this firm? Round the answer to two decimal places in pe..
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