Reference no: EM131178042
Which of the following statements about capital investment analysis is most correct?
A. Although a useful accounting concept, breakeven analysis has no role in capital investment analysis.
B. Net present value (NPV) measures a project’s rate of return, whereas internal rate of return (IRR) measures a project’s dollar return.
C. An NPV of zero indicates that the project is expected to return the amount of the initial investment, but it will not provide a return on that investment.
D. On most projects, the NPV and IRR measures will give conflicting results, so managers must use judgment as to which measure to use.
E. Payback measures the length of time it takes to recover the initial investment in the project.
Which of the following statements about payback (payback period) is most correct?
A. Payback is a measure of time breakeven.
B. Payback is a rough measure of risk.
C.Payback is a rough measure of liquidity
D. A & B are correct.
E. A,B, & C are correct.
Which of the following is not considered a relevant cash flow when determining incremental cash flows for a new project?
A. The use of floor space that is currently unused but available for any new project.
B. Revenues from an existing service that would be lost if the new project was intiated.
C. Shipping and installation costs associated with the new project.
D. The cost of a consultant's report concerning the feasibility of the project that was completed (and paid for) in the previous year.
E. An increase in current assets that would result if the project is undertaken.
|
Calculate any profit measures deemed necessary
: Using the Moon Company’s annual report, calculate any profit measures deemed necessary and discuss the implications of the profitability of the company.
|
|
Payoffs have been equalized and riskless hedged investments
: Madeline Manufacturing Inc.’s current stock price is $45 per share. Call options for this stock exist that permit the holder to purchase one share at an exercise price of $35. These options will expire at the end of 1 year, at which time Madeline’s s..
|
|
Securities in which the fund invests increase in value
: You purchased 2,000 shares of the New Fund at a price of $12 per share at the beginning of the year. You paid a front-end load of 4%. The securities in which the fund invests increase in value by 12% during the year. The fund's expense ratio is 2.2%...
|
|
What is the percentage margin on the above transaction
: You've borrowed $23,500 on margin to buy shares in Disney, which is now selling at $47 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. What is the percentage margin on the above transaction. How..
|
|
When determining incremental cash flows for new project
: Which of the following is not considered a relevant cash flow when determining incremental cash flows for a new project? Which of the following statements about payback (payback period) is most correct? Which of the following statements about capital..
|
|
Financial transaction involving two financial institutions
: Financial Intermediation Look in a business periodical for news about a recent financial transaction involving two financial institutions. For this transaction, determine the following: How will each institution's balance sheet be affected? Will eith..
|
|
What are the yield to maturity and yield to call of call
: What are the yield to maturity and the yield to call of a 20 year, 8% bond that is selling for $1150 has a call value of $1100 in year 6? Which will the investor make? We buy a 15 year, 10% bond yielding 9%. We sell it after 4 years when market rates..
|
|
What is the growth rate and current value
: The common stock for Jason's Enterprises is expected to pay $1.95 in dividends next year. what is the growth rate? what is the current value of jason's stock?
|
|
About the cost of common equity
: Cost of Common Equity Pearson Motors has a target capital structure of 35% debt and 65% common equity, with no preferred stock. The yield to maturity on the company's outstanding bonds is 11%, and its tax rate is 40%. Pearson's CFO estimates that the..
|