1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Colt1911 [192]
2 years ago
7

Weatherall Enterprises has no debt or preferred stock¾it is an all-equity firm¾and has a beta of 2.0. The chief financial office

r is evaluating a project with an expected return of 14%, before any risk adjustment. The risk-free rate is 5%, and the market risk premium is 4%. The project being evaluated is riskier than an average project, in terms of both its beta risk and its total risk. Which of the following statements is CORRECT?
A.Riskier-than-average projects should have their expected returns increased to reflect their higher risk. Clearly, this would make the project acceptable regardless of the amount of the adjustment.
B.Capital budgeting projects should be evaluated solely on the basis of their total risk. Thus, insufficient information has been provided to make the accept/reject decision.
C.The accept/reject decision depends on the firm's risk-adjustment policy. If Weatherall's policy is to increase the required return on a riskier-than-average project to 3% over rS, then it should reject the project.
D.The project should definitely be accepted because its expected return (before any risk adjustments) is greater than its required return.
E.The project should definitely be rejected because its expected return (before risk adjustment) is less than its required retu
Business
1 answer:
Helen [10]2 years ago
3 0

Answer:

The accept/reject decision depends on the firm's risk-adjustment policy. If Weatherall's policy is to increase the required return on a riskier-than-average project to 3% over rS, then it should reject the project - option C

Explanation:

Once the said project is riskier, the accept/ reject criterion will be considered based on risk adjusted discount rate which would be higher than company’s cost of capital by the amount of risk premium. Here the risk premium is 3%.

Thus, the decision to accept/reject depends on the risk-adjustment policy of the firm. If Weatherall's policy is to increase the required return on a riskier-than-average project to 3% over rS, then it should reject the project - option C is the best answer.

You might be interested in
What are some common motivations of financial statement fraud examination?
WINSTONCH [101]

Answer:

To support a high stock price, to support a bond or stock offering, or to increase the company's stock price.

Explanation:

The motivation to publish fraudulent financial statements varies depending on the situation. A common theme in many cases of fraud is the attempt to improve the reported financial information to maintain high stock prices, support bonds or stock quotes, or raise a company's stock price. In many companies that published fraudulent financial statements, senior executives held significant stocks or stock options, and lowering the price of the stock would significantly reduce personal net worth or make worthless options. As a result, senior management had to maintain the high share price and therefore needed high returns to maintain the high share price. Investors value reports that increase profits each year. Indeed, the decline in earnings can significantly lower a company's stock price. Sometimes fraudulent financial reports cause line managers to exaggerate the results to meet the company or other expectations. Sometimes the cost of failure in corporate governance is high, and when it comes to choosing between failure and fraud, some managers quickly turn to fraud.

5 0
3 years ago
Lawsuits related to performance management usually involve charges of discrimination or:____.
7nadin3 [17]

Lawsuits related to performance management usually involve charges of discrimination or<u> unjust dismissal</u>.

Discrimination is the unfair discrimination of people based on the group, class, or other categories to which they belong or are perceived to belong. People may be discriminated against based on race, gender, age, religion, disability, sexual orientation, or other categories.

Discrimination is particularly the discriminatory treatment of individuals or groups over other privileges available to members of another group because of their actual or perceived affiliation with a particular group or social category. are treated unfairly and poorly.

Learn more about Discrimination here: brainly.com/question/1084594

#SPJ4

3 0
2 years ago
Cash is King!Good cash management is an essential job of the financial manager! You own a small auto sales business called King
fomenos

Answer:

The solution to the given problem is given below.

Explanation:

1. Do you believe that the company needs outside financing?

Yes, Company needs outside finance total $ 40,000 as $25,000 in month of Feb and $15,000 in month of Apr il.

2. What is the minimum line of credit to request from a lender?

Minimum line of credit needed is $40,000

3. Do you think you are a good candidate for the line of credit? Why?

Yes, we are good candidate for line of credit because we can start repayment by May and repay by July and after repayment we will have ending March Cash balance $100,000 .

Detailed calculations are attached with the image.

3 0
3 years ago
Jason Liang has gotten three job offers. He is now looking at the benefits packages of all three to see what he likes and doesn'
Dovator [93]

Answer:

Which step in the career planning process is Jason completing?

E) Evaluate financial and other factors of positions offered.

Explanation:

Career planning is an aspect of career management that involves self evaluation and formulation goals to have a strong career path. It involves constant evaluation in improving skills and setting goals to ensure that one achieves career objectives that they set out. Career planning is a step-wise procedure that is to move an individual to a direction that will make him/her achieve professional excellence in the career that is chosen. The following steps are involved in career planning;

1. Self assessment

Self assessment involves the evaluation of one's own skills and interests and also capabilities to understand what he/she already has and where he/she wants to be in the career path.

2. Research on careers

Once the skills and interests has been assessed, one can research on the careers they would love to pursue to find out if they align with their skills, capabilities and interests

3. Set career objectives

The individual should then set clean career objectives, both short-term and long-term objectives.

4. Learn and improve skills

In order to align with set career objectives, the individual should keep improving and acquiring new skills.

5. Search for a Job

This involves the preparation of Curriculum vitae and supporting documents and search for jobs that offer opportunities that will help in advancing your career.

6. Once you receive job offers, evaluate various factors including the financial ones offered by the positions.

7 0
3 years ago
Suppose Nippon Technology had the following results related to cash flows for 2020: Net Income of $8,400,000 Adjustments from Op
Flauer [41]

Answer:

$9,800,000

Explanation:

                Statement of Cash Flows (Indirect Method)

Particulars                                                                           Amount

Net income                                                                      $8,400,000

Add: Adjustment for operating activities                      -<u>$1,300,000</u>

Net cash flow from Operating Activities (I)                    $7,100,000

Add: Net Cash Flow from Investing Activities (II)         -$1,300,000

Add: Net Cash Flow from Financing Activities (III)        <u>$4,000,000</u>

Net Cash Flow (I+II+III)                                                   <u>$9,800,000</u>

4 0
3 years ago
Other questions:
  • Eric and Chelsea sign a contract where Eric will sell his used car to Chelsea for $400. That night, Chelsea's parents surprise h
    5·1 answer
  • Zhang company reported cost of goods sold of $842,000, beginning inventory of $38,600 and ending inventory of $47,000. the avera
    5·1 answer
  • In the 1850s, the issue of slavery complicated the proposal to build a transcontinental railroad, as select one:
    5·1 answer
  • Select all that apply GAAP and IFRS rules ______. require that the same method be used for both internal and external segment re
    10·1 answer
  • Why is it important to write a business plan?
    5·2 answers
  • Which of the following describes a non-employee business?
    14·2 answers
  • Thomas was thinking about the car he wants to buy in a few years. He does not know what he should do now so that he can buy the
    15·1 answer
  • Revenue is traditionally recognized in the accounting records when
    7·1 answer
  • Checkers uses the periodic inventory system. For the current month, the beginning inventory consisted of 7,200 units that cost $
    5·1 answer
  • To keep high inflation from eroding the value of money, monetary authorities in the united states.
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!