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1) The equivalent annual cost method is most appropriate in which of the following situations?
In each case, assume that several mutually exclusive options are available.
A) Introducing a new product line
B) Adding another store to a chain of retail stores
C) Installation of federally mandated safety equipment
D) Equipment to reduce production costs
2) If a project has a profitability index greater than 1,
A) the npv will also be positive.
B) the irr will be higher than the required rate of return.
C) the present value of future cash flows will exceed the amount invested in the project.
D) all of the above.
Based on the corporate valuation model, Lee Inc.'s total corporate value is $750 million. Its balance sheet shows $100 million notes payable, $200 million of long-term debt, $40 million of common stock (par plus paid-in-capital), and $160 million of ..
(leverage and EPS) You have developed the following pro forma income statement for your corporation: If sales should increase by 25 percent, by what percent would earnings before interest and taxes and net income increase. If sales decrease by 25 per..
The Thomas Co. is analyzing a proposed expansion project. Currently, the company owns 15 acres of land, which it purchased for $6 million 5 years ago. The land is currently valued at $7.2 million and is totally debt-free. Should the Thomas Co. pursue..
Suppose the risk-free interest rate is 4% and the market portfolio has an expected return of 10% and a standard deviation of 16%. Johnson & Johnson Corporation stock has a beta of 0.32. What is its expected return?
A project has an initial cost of $63,700, expected net cash inflows of $11,000 per year for 11 years, and a cost of capital of 12%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Rou..
Dew Drop In, Inc. announces is quarterly dividend will increase from $3.80 to $4.00. After the announcement, the price of Dew Drop In, Inc.'s stock drops. The most likely explanation is that the stock market is a perfect market. investors were expect..
Beck Industries bond has a current market price of $1060, 7% coupon, $1000 par, 10 years maturity. What is the yield to maturity? So, do similar risk bonds being issued today (at par) have a coupon rate higher or lower than Beck’s?
Which of the following could be expected to result in a stock market price change?
Which of the following does not need to be known in order to compute the p-value? a. knowledge of whether the test is one-tailed or two-tailed b. the value of the test statistic c. the level of significance d. All of these are needed.
How might a firm’s cost of capital change if they moved to a more ideal capital structure (i.e., determine the weighted average cost of capital at the target capital structure)? Briefly compare and contrast the pros/cons of using the current vs targe..
Assume that the economy has three types of people. 20% are fad followers, 70% are passive investors, and 10% are informed traders. The portfolio consisting of all informed traders has a beta of 1.2 and an alpha of 2.86%. What is the alpha for the fad..
Marcia Almeida works as a sales analyst for a toy manufacturer. She predicts that toy sales will decrease by 20% from May to June. If the amount of the sales decrease is $605,400, what level of sales is she predicting for June? Because of Father's Da..
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