What is the expected average accounting rate

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Reference no: EM132805138

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Q1. Joe's burger shop is considering opening a new outlet for a period of three years. The up-front costs are $288,000 (no salvage value). The outlet is expected to earn net income of $31,500 a year. What is the expected average accounting rate of return on this venture?

a. 14.93%

b. 21.88%

c. 43.75%

d. 31.25%

e. 38.76%

Q2. Matrix, Inc. has 20,000 shares of common stock outstanding at a market price of $26 a share. This stock was originally issued at $19 per share. The firm also has a bond issue outstanding with a total face value of $300,000 which is selling for 97 % of face value. The cost of equity is 10 % while the after-tax cost of debt is 5 %. The firm has a beta of 1.2 and a tax rate of 35 %. What is Matrix's weighted average cost of capital? Please show your work!

Q3. NPV and IRR can lead to different decisions in situations investment decision involves mutually exclusive choices.

a. TRUE

b. FALSE

Reference no: EM132805138

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