Reference no: EM132706512

Problem 1: Which of the following is the DuPont formula for return on stockholders' equity?

a. Return on stockholders' equity = Profit margin × (Average Stockholders' Equity ÷ Average Total Assets)
b. Return on stockholders' equity = Operating Income ÷ Average Stockholders' Equity
c. Return on stockholders' equity = Common Stock + Preferred Stock + Additional Paid-in-Capital - Treasury Stock
d. Return on stockholders' equity = (Operating Income ÷ Sales) × (Average Total Assets ÷ Average Stockholders' Equity)

Problem 2: At the end of the capital rationing process, unfunded proposals are:

a. reconsidered if funds become available later.
b. analyzed to check if the quantitative considerations change the decision.
c. rejected and alternative proposals are screened.
d. screened again using the average rate of return method.

Problem 3: A firm plans to purchase a new machine at the cost of $400,000. The machine has a useful life of 10 years. The firm expects to incur an estimate of $50,000 as cash revenue and $25,000 as cash expenses from use of the machine. Calculate the cash payback period for the machine.

a. 8 years
b. 10 years
c. 16 years
d. 5 years