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Suppose a firm relies exclusively on the payback method when making capital budgeting decisions, and it sets a 4-year payback regardless of economic conditions. Other things held constant, which of the following statements is most likely to be true?
a. It will accept too many short-term projects and reject too many long-term projects (as judged by the NPV).b. It will accept too many long-term projects and reject too many short-term projects (as judged by the NPV).c. The firm will accept too many projects in all economic states because a 4-year payback is too low.d. The firm will accept too few projects in all economic states because a 4-year payback is too high.e. If the 4-year payback results in accepting just the right set of projects under average economic conditions, then this payback will result in too few long-term projects when the economy is weak.
What is its cost of common equity and its WACC? Round your answers to two decimal places.
The Harding corporation produces skates. The company's income statement for 2001 is as follows, calculate the Degree of operating leverage
Research and identify the current levels of the real and nominal GDP, unemployment rate, the inflation rate and the key interest rate. Relate these variables to the current state of the economy.
A stock just paid a dividend of $1.2. The required rate of return is 11.5%, and the constant growth rate is 3.6%. What is the current stock price.
What sales volume would be required in order to meet this profit goal?
Discuss and explain the situations under which financial leverage is beneficial vs. when it is harmful. Is there a point at which it is beneficial from some stakeholders' point of view but not beneficial from other stakeholders view point?
Calculate the standard deviation of portfolio the details furnished below that is invested 40% in stock A and 60% in stock B
Describe how revenue sources are planned and budgeted in nonprofits. What are at least 4 of key revenue assumptions that should be made in for-profit entity?
A stock has a beta of .80. The return on the market is 13% and the return on risk-free securities is 7%. What is the required return on this particular stock?
A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price, and maturity. Describe the trader's position. Under what circumstances does the price of the call equal the price of th..
The 5.63 percent, $1,000 face value bonds of Tim McKnight, Inc., are currently selling at $936.78. What is the current yield?
MEC's tax rate is 40%. Two projects are available: Project A has a rate of return of 14%, while Project B's return is 9%. These two projects are equally risky and about as risky as the firm's existing assets.
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