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KiRa [710]
4 years ago
12

A firm's WACC can be correctly used to discount the expected cash flows of a new project when that project will:

Business
1 answer:
Fudgin [204]4 years ago
7 0

Answer:

b. have the same level of risk as the firm's current operations.

Explanation:

According to the M&M's model of capital structure, two entities operating in the same type of business with similar business risks (e.g proportion of variable costs to fixed costs, operating profits) have the same total value irrespective of their capital structures. This means that in order for WACC to be relevant for discounting purposes of a new project it's important that the new project and the firm's risks are same (at least the business risks).

Secondly, having same level of risk also means that the project will have a similar operating income generated by it's assets, hence when the return of two projects is similar the cost of finance/business will also be similar therefore the new project must share same level of risk in order for WACC to be used as a discount rate.

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Which of the following statements about the inclusion of boot in a nontaxable exchange is false? Multiple Choice The purpose of
ankoles [38]

<u>Answer:</u>

<em>The purpose of including boot in a nontaxable exchange is to equalize the adjusted tax bases of the properties exchanged. </em>

<em></em>

<u>Explanation:</u>

A nontaxable exchange is a trade wherein you are not exhausted on any addition, and you cannot deduct any loss. On the off chance that you get property in a "nontaxable business", its premise usually is equivalent to the assumption of the property you moved. A nontaxable increase or misfortune is otherwise called an unrecognized addition or misfortune.

3 0
3 years ago
The risk-free rate of return is 8%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporat
Reptile [31]

Answer:

A)

risk free rate = 8%

market rate = 15%

Xyrong's beta = 1.2

pays 40% of income in dividends

latest EPS = $10

ROE = 18%

k = 8% + (1.2 x 7%) = 16.4%

g = ROE x (1 - 40%) = 10.8%

div1 = [(40% x $10) x (1 + g)] = $4 x 1.108 = $4.432

stock price = $4.432 / (16.4% - 10.8%) = $79.14

B)

div0 = $4

div1 = $4.432

price0 = $103

price1 = $79.14 x (1 + g) = $79.14 x 1.108 = $87.69

holding period return = ($4.43 + $87.69 - $103) / $103] = -0.1056 or -10.56%

5 0
3 years ago
Name and explain the relationship between corporate social responsibility and triple bottom line.
alex41 [277]

<span>The corporate social responsibility is the task of every individual in the corporation to balance between economy and the ecosystems. It is related to the triple bottom line because it includes social, environmental and financial responsibility.</span>

4 0
3 years ago
the current price of a stock is 200 if a coll option on this stock has a strike price of 201 the call is
PSYCHO15rus [73]

The call in this scenario is known as Out of the money (OTM).

Out of the money is when an option has no intrinsic value but rather, has an extrinsic value.

  • Here, the current stock price is below the strike price of 201,then, we say that the call is out of money.

  • A call option is called Out of the money when the underlying price is trading below the strike price of the call.

Hence, the call in this scenario is known as Out of the money (OTM)

Read more about Out of the money (OTM):

<em>brainly.com/question/15684431</em>

6 0
2 years ago
Ann, Bob, Carl, and Dan are randomly lined up. The first two players in line then play a game; the winner of that game plays a g
Furkat [3]

Answer:

The probability of Ann winning the prize is 2.464

Explanation:

The probability of Ann winning the prize can be analysed as potray below

1.pr(of Ann being the first player selected).

Here Ann plays the 2nd,3rd and 4th player to win prize,the probability=0.8×0.8×0.8=0.512

2.Pr(of Ann being the second player selected)

If Ann is randomly selected as the second player,she will still need to play three matches to win with 1st,3rd and 4th

0.8×0.8×0.8=0.512

3.Pr(of Ann. Being the third player chooses randomly),Ann will get to play just two players i.e the winner of 1and 2 and the 4th.the probability=0.8×0.8=0.64

4.Pr(of Ann being the 4th player choosen randomly)

Ann gets to play only one match to win the prize in this scenario

So probability of a Ann win is 0.8

Total probability a Ann winning the prize=0.512+0.512+0.64+0.8=2.464

5 0
4 years ago
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