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4 years ago

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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Needs for a project could include telecommunications, transportation, power, and availability of technically skilled talent. The

VMariaS [17]

Answer:

2. Infrastructure

Explanation:

Infraestructure is the collection of physical facilities that a business needs to perform an economic activity in a particular enviroment.

The needs described in the question are infraestructure needs because they refer to physical facilities such as telecommunications infraestructure, transporation means, power (electricity) facilities.

The availability of technically skilled talent is not a physical asset, but it is human capital that is needed to build the infraestructure.

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4 years ago

In a minimum 200 words explain the idea behind the balance of power. How did this concept play itself out in Europe? How was thi

Ket [755]

Answer:

It meant a political situation among the states in which none of them achieved a power superior to the others. It is an idea of the late Middle Ages, applied to major or minor geographic regions that comprise the plurality of sovereign territories. Throughout Europe there is a legitimate feeling, always subject to interpretation, whereby any action required the confirmation of the rest of the States, the most significant case being the invasion of a territory. In this way the doctrine of just war was reached, to the problem of to what extent and to what extent the actual or imminent engraving of a State could mean a warlike justification. Transactions between contestants, neutral or rival, never ended, hence the relevance of diplomacy, as the concepts of balance, neutrality, freedom of Europe or sovereignty are interpreted continuously, while being used in conversations. Some thought of equilibrium as a natural system, because it was a consequence of international relations, and when a great power had too much force it threatened the others, and therefore, had to counteract the disproportion. Others considered it a desired goal for which he had fought.

In the rest of the world this balance of powers is characterized by the profusion of dictatorial or authoritarian regimes that have dominated the political scene and that have influenced the future of their peoples. A second point is the emergence of serious and bloody war conflicts, by territorial issues, which is not explained very well both in its unleashing and in its results, as consequences of the mere quantification of the powers faced. In all these, both in its gestation and its consequences, the role it plays in the character, personal ambitions and strategic conceptions of the leaders or rulers who govern the destinies of the countries involved appears with particular relevance.

Explanation:

7 0

3 years ago

Sylvia records the purchases of inventory in the current accounting period even though she will actually pay for the inventory i

Sergio [31]

The answer is: C.accrual basis of accounting

Accrual basis of accounting would record a certain transaction as soon as it happen, even though an exchange of payment has not been made. Compared to any other basis, accrued basis tend to the most likely to represent the actual financial condition of a company. This is why this basis is used as the current industry standard.

6 0

3 years ago

If nominal GDP rises we can say that A. production has risen or prices have risen or both have risen. B. prices have risen and p

Svet_ta [14]

Answer:

All the options are possible:

A. production has risen or prices have risen or both have risen.
B. prices have risen and production remains constant.
C. production has risen and prices remain constant.
D. production has fallen and prices have risen.

Explanation:

Nominal gross domestic product (GDP) represents the market value of all the new and legal goods and services produced within a country during a given period of time (generally a year). Since it is not adjusted to inflation (real GDP is), an increase in nominal GDP may result from higher inflation or higher production, or a combination of both. Only if adjusted to inflation (real GDP) we can know if the increase resulted from higher production.

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3 years ago

You are considering two independent projects that have differing requirements.

Ugo [173]

Answer:

I will accept Project "B."

Explanation:

Though, Project B has a higher required Return on Investment ROI which is 13.5% but has a progressive increasing cash flow of Project B has an initial cost of $70,000 and cash flows of $15,000, $18,000, and $41,000 for Years 1 to 3, respectively.

Analysis of the Cash Flow: 

$18,000.00 - $15,000.00 = $3,000.00

$41,000.00 - $18000.00 = $23,000.00.

∴ with Initial Outlay of $70,000.00

$3,000.00 + $23,000.00 = $26,000.00

while

Project A has a retrogressive trend of cash flow of $21,000.00

∴$49,000.00 - $21,000.00 = $28,000.00

$28,000.00 - $12,000.00 = $16,000.00

Therefore comparing the two figures from Project A & B respectively:

Project A = $16,000.00

Project B = $26,000.00

It shows a deficit of $10,000.00 for Project B & surplus of $10,000.00 for Project A in the 3 years of required ROI.

4 0

3 years ago