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1. Which of the following is the correct definition of Internal Rate of Return (IRR)?
IRR is the rate at which the present value of all future cash flows equals initial outlay. IRR is the same as Average Accounting Rate of Return.
IRR is the rate at which the Net Present Value (NPV) equals present value of all future cash flows.
IRR is the rate of return required by project's investors.
IRR is the rate at which Net Present Value (NPV) equals initial outlay.
2. Which one of the following indicates that a project is expected to create value for its owners?
Profitability index less than zero
Positive IRR
Internal rate of return (IRR) that is less than the required rate of return
NPV that is greater than zero
Payback period greater than the cut-off period
A firm is expected to pay a dividend of $2.65 next year and $2.80 the following year. Financial analysts believe the stock will be at their price target of $45 in two years. Compute the value of this stock with a required return of 12.6 percent.
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Calculate the rate of return on equity (ROE) for each firm. Calculate the return on invested capital (ROIC) for each firm.
Chris’s Outdoor Furniture, Inc., has net cash flows from operating activities for the last year of $450 million. The income statement shows that net income is $425 million and depreciation expense is $55 million. At the beginning of the year, the bal..
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Assuming that the partnership actually pays those cash flows, what would be the net present value of this investment if the interest rate was 12.2%?
what is the expected return of the stock? What is the expected return of a stock with a beta of 1.03?
RedStone Mines stock returned 7.5, 15.3, -9.2, and 11.5 percent over the past four years, respectively. What is the geometric average return?
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