Increase its expected future return on equity

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Reference no: EM13850097

1. If a firm takes steps that increase its expected future ROE (return on equity), its stock price will _________ increase

a) never

b) not necessarily

c) always

2. Based on your understanding of the uses and limitations of ROE, which of the following projects should be chosen if they have the same risk and cost of capital?

a) Project X, with 35% ROE and a large investment, generating high expected cash flows

b) Project Y, with 40% ROE and a small investment, generating low expected cash flows

3. Suppose you are trying to decide whether to invest in a company that generates a high expected ROE, and you want to conduct further analysis on the company’s performance. If you wanted to conduct a trend analysis, you would:

a) Compare the firm’s financial ratios with other firms in the industry for a particular year

b) Analyze the firm’s financial ratios over time

4. According to your understanding, a company with one key product is considered to be ___________ risky than companies with a wide range of products.

a) more

b) less

Reference no: EM13850097

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