Reference no: EM13833194
Shortcomings of the dividend pricing models suggest that we need a pricing model that is more inclusive than the dividend models and that provides expected returns for companies based on aspects besides their historical dividend patterns. Which of these below is NOT one of these aspects?
A. the company's risk
B. the premium for taking on risk
C. the reward for waiting
D. stable dividends Which of the statements below is NOT correct?
A. If two investment have the same expected return, the investment with the lower risk is preferred.
B. If two investment have the same expected return, the investment with the greater risk is preferred.
C. If two investments have the same expected risk, the investment with the higher expected return is preferred.
D. If one investment has a higher expected return and a greater level of risk than another, it's is not clear which investment is the preferred choice.
Which of the choices below is FALSE
A. When issuing a puttable bond, the firm anticipates that interest rates will rise over the life of the bond.
B. When issuing a callable bond, the firm anticipates that interest rates will fall over the life of the bond.
C. When issuing a callable bond, the firm anticipates that interest rates will rise over the life of the bond.
D. A puttable bond is essentially the reverse of a callable bond. Project A has an NPV of $20,000 and a PI of 1.2. Project B has an NPV of $10,000 and a PIof 1.3. Both projects have equal lives. Which project should be preferred if we are NOT concerned with capital rationing (that is, we are NOT concerned with being short of funds) A) we should prefer Project B since it has a higher PI.B) We should compute the EAA before we make any decision.C) We should prefer Project A since it has a higher NPV.D) We should prefer Project B if it has a higher IRR
Berra, Inc. is currently considering an eight-year project that has an initial outlay or cost of $120,000. The future cash inflows from its project for years 1 through 8 are the same at $30,000. Berra has a discount rate of 11%. Because of capital rationing (shortage of funds for financing), Berra wants to compute the profitability index (PI) for each project. What is the PI for Berra's current project?
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