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Colt1911 [192]
3 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]3 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.

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Preparing Effective Business Presentations Getting ready for a presentation may cause feelings of anxiety. The best way to reduc
rodikova [14]

Answer:

Answers explained below

Explanation:

1. Option b) Knowing your purpose gives you a clear direction on what to present and how to present. The purpose of clarity leads to quality content that connects with the audience.

2. Option a, b and d

-> We must know the general elements such as age, gender, and education. This generally determines the topic's appeal to the audience and you need to know ways of delivery that will connect with the audience.

-> Further, the idea is that the audience remembers the content and main catch points and not what we will get out of presentation.

5 0
3 years ago
Which of the following events would unambiguously cause a decrease in the equilibrium price of cotton shirts? a. a decrease in t
ella [17]

Answer:

a. a decrease in the price of wool shirts and a decrease in the price of raw cotton

Explanation:

A decrease in the price of wool shirts would lead to an increase in demand for wool shirts and a decrease in demand for cotton shirt. Cotton and wool shirts are substitutes goods. Price would fall and quantity would fall. A decrease in the price of raw cotton would increase production of cotton shirts and the supply of shirts would increase. This would lead to a rightward shift in the supply curve. Quantity would increase and price would fall. The combined effect of this would lead to an unambiguous decrease in price.

I hope my answer helps you

3 0
3 years ago
A recent college graduate with a major in economics attends a job fair but has not yet found a job. this graduate is counted as
Ipatiy [6.2K]

A recent college graduate with a major in economics attends a job fair but has not yet found a job. This graduate is counted as a Frictionally unemployed worker.

What is frictional unemployment?

Frictional unemployment happens when a person is voluntarily job searching or searching for a new career. Frictional unemployment isn't necessarily a bad thing. In fact, because frictional unemployment is voluntary, it can be a sign of a healthy economy. It means that employees are seeking new jobs and new careers

What is an example of frictional unemployment?

Examples of frictional unemployment include: Employees leaving their current positions to find new ones. Employees seeking a career change. Individuals entering the workforce for the first time after graduating from college or searching for their first job.

Learn more about frictional unemployment:

brainly.com/question/11481076

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5 0
1 year ago
Over the first four years of the company's life, the company earned the following net income (loss): S $3,000; $6,000, and ($2,0
Klio2033 [76]

Answer:

The answer is D.

Explanation:

Total earnings in 4 years

= 6000 + 3000 + 6000 - 2000

= $13,000

Ending retained earnings after 4 years

= $10,000

Total amount paid out as dividend in 4 years

= $13,000 - 10,000

= $3,000

Average amount of dividends paid per year

= $3,000/4

= $750

5 0
3 years ago
Why might someone who is just starting out prefer a regular savings account to a CD?
iragen [17]
Cds are time deposits that you can close before the term ends but might pay early penalty for withdrawing early. Cds vary with the financial institution. I would say a savings account
6 0
3 years ago
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