Which situations should the management of company purchase

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Problem 1: Which of the following is a qualitative consideration that influences capital investment analysis?

a.Manufacturing productivity
b.Currency exchange rates
c.Income tax
d.Inflation

Problem 2: Which of the following is the formula to compute financial leverage?

a.Financial leverage = Average total assets ÷ Average stockholders' equity
b.Financial leverage = Average stockholders' equity ÷ Operating income
c.Financial leverage = Sales ÷ Average total assets
d.Financial leverage = Operating income ÷ Sales

Problem 3: Assume that the management of a company is evaluating the purchase of a new machine. In which of the following situations should the management of the company purchase the machine or consider it for further analysis?

a.If the present value of an annuity determined by the management is greater than the average rate of return
b.If the minimum rate of return required by the management is greater than the average rate of return
c.If the average rate of return is greater than the present value of an annuity determined by the management
d.If the average rate of return is greater than the minimum rate of return required by the management

Reference no: EM132706504

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