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meriva
3 years ago
7

Bloom and Co. has no debt or preferred stock it uses only equity capital, and has two equally sized divisions. Division X's cost

of capital is 10.0%, Division Y's cost is 14.0%, and the corporate (composite) WACC is 12.0%. All of Division X's projects are equally risky, as are all of Division Y's projects. However, the projects of Division X are less risky than those of Division Y. Which of the following projects should the firm accept?
a. A Division Y project with a 12% return.
b. A Division X project with an 11% return.
c. A Division X project with a 9% return.
d. A Division Y project with an 11% return.
e. A Division Y project with a 13% return.
Business
1 answer:
EastWind [94]3 years ago
8 0

Answer:

b. A Division X project with an 11% return.

Explanation:

The firm should accept A Division X project with an 11% return. This is because the return of 11% is greater than the cost of capital of 10% for Division X.

Return > cost of capital

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Recommend ways in which business can contribute time and effort to advance the well being of others in business context in the f
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7 0
3 years ago
Two stockbrokers, in clear violation of the rules of their employer, sold worthless stocks to unsuspecting customers. There was
ZanzabumX [31]

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It is worthy of note that this power is only valid if the third party in the transaction assumes from the conduct of the agent, that they have such powers to act.

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3 years ago
A product that sells today for $150 per unit is expected to escalate in price by 6% in year one, 8% in year two and 10% in year
saveliy_v [14]

Answer:

<u>     selling price at year 3:</u> $ 188.89

<u>at constant dollar year 3:</u> $  167.94

Explanation:

selling price x accumualte raises:

150 \times (1+0.06) \times (1+0.08) \times (1+0.10)

150 \times 1,25928‬

selling price: 188,892

now, to calculate the constante dollar we discount for inflation:

188.892 \div ((1+0.03) \times (1+0.04) \times (1+0.05))

188.892 \div 1,12476‬

constant dollar selling price: 167,9398271‬

4 0
3 years ago
Norris Enterprises, an all-equity firm, has a beta of 2.0. The chief financial officer is evaluating a project with an expected
Genrish500 [490]

Answer:

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

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

4 0
3 years ago
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