To measure value-concept of time value of money is used

Assignment Help Financial Management

Reference no: EM131864365

1. HighLev Incorporated borrows heavily and uses the leverage to boost its return on equity to 30% this year, nearly 10% higher than the industry average. However, HighLev's stock price decreases relative to its industry counterparts. How is this possible?

a. Markets are inefficient and fail to recognize the benefits of leverage.

b. The increased debt resulted in interest payments that made HighLev's operating income drop even though return on equity increased.

c. Shareholders are not interested in return on equity.

d. the high levels of debt increased the riskiness of HighLev relative to its competitors.

2. To measure value, the concept of time value of money is used

a. to determine the interest rate paid on corporate debt.

b. to bring the future benefits and costs of a project, measured by its expected profits, back to the present.

c. to bring the future benefits and costs of a project, measured by its cash flows, back to the present.

d. to ensure that expected future profits exceed current profits today.

Reference no: EM131864365

Questions Cloud

How much can you withdraw in equal amounts each year : Suppose you plan to save $8,000 per year for the 40 years you are working. How much can you withdraw in equal amounts each year for the 35 years you are retired

How much money will the bank loan you : You are ready to buy a house and you have $50,000 for a down payment and closing costs. How much money will the bank loan you?

Some of reasons that make foreign manufacturers : what are some of the reasons that make foreign manufacturers like volkswagen and GM decide to invest in china?

Firm balance sheet provide to the viewing public : What information does a firm's balance sheet provide to the viewing public?

To measure value-concept of time value of money is used : To measure value, the concept of time value of money is used

Provide an opportunity to engage in the strategic marketing : Provide an opportunity to engage in the strategic marketing process.Discuss how retailers can create and sustain a competitive advantage.

Statements concerning the required rate of return on stocks : Which of the following statements concerning the required rate of return on stocks is true?

How a firm warehousing strategy works : Describe how a firm's warehousing strategy for a particular commodity impacts decisions regarding its manufacturing strategy.

Develop the joint probability distribution of and z and w : Develop the joint probability distribution of and Z and W. Find the conditional mean, variance and standard deviation of X conditional on Y=1.

User Account

All Pages