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Olenka [21]
3 years ago
12

Suppose that two firms, A and B, are considering the same project. The project is in the same risk class as firm A's overall ope

rations. The project has an IRR of 13.0 percent. Firm A has a beta of 1.2, while firm B's beta is 0.9. The risk-free rate is 4.5 percent and the market risk premium is 7.0 percent. Which firm(s) should accept the project?A) firm A onlyB) firm B onlyC) both firms A and BD) neither firm A nor BE) The answer cannot be determined without more information.
Business
1 answer:
mario62 [17]3 years ago
5 0

Answer:

Firm A should accept the project beacause it has high required rate of return which means low risk involved.

Explanation:

Rate of return = risk free return + Beta ( market risk premium)

Firm A

rate of return = 0.045 + 1.2 (0.07)

= 0.045 + 0.084

= 12.9%

Firm B ;

 rate of return = 0.045 + 0.9(0.07)

= 0.045 + 0.063

= 10.8%

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Cool Cars Location (Scenario) An automobile producer from Southern Italy, Cool Cars, has developed plans to expand international
S_A_V [24]

Answer:

D. Land and construction costs are comparatively less expensive in Russia than in Canada

Explanation:

Option D would favor Russia ahead of Canada because of the fact that manufacturing costs are cheaper and they have easier access to Capital. I came to this conclusion since it has been stated that land and construction costs are cheaper in Russia.

In Economics the goal of every firm is to minimize cost and to maximize profit. Option D is cost minimizing for cool cars if they want to duplicate their overall success.

8 0
3 years ago
Sarasota Company has a factory machine with a book value of $86,300 and a remaining useful life of 7 years. It can be sold for $
RUDIKE [14]

Answer:

See the explanation for answer

Explanation:

Analysis showing whether the old machine should be retained or replaced is as prepared below:

                                                     Retain        Replace            Net Income

                                              Equipment     Equipment      Increase(Decrease)                            

Variable manufacturing costs 43,63,100 32,32,600 11,30,500

New machine costs                     0    3,59,000 -3,59,000

Sell old machine                             0          -33,500          33,500

Total                                       43,63,100   35,58,100   8,05,000

The old factory machine should be replaced as there is increase in net income by 805,000 when old machine is replaced.

4 0
3 years ago
Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. H
AURORKA [14]

Answer: B. One asset would increase $1,750 and a different asset would decrease $1,750, causing no effect

Explanation:

From the information given in the question, the journal entry at the time of sales will be represented as:

Debit Accounts receivable $1,750

Credit Sales $1750

Now, when the credit receipt is received as illustrated in the question, the journal entry will be:

Debit Cash $1,750

Credit Accounts receivable $1,750

Therefore, one asset would increase $1,750 and a different asset would decrease $1,750, causing no effect.

The correct option is B.

7 0
3 years ago
A​ firm's operating cash flow​ (OCF) is defined as​ ________. A. gross profit minus operating expenses B. EBIT times one minus t
Sloan [31]

Answer:

B. EBIT times one minus the tax rate plus depreciation

Explanation:

The formula to calculate the operating cash flow is given below:

Operating cash flow = EBIT + Depreciation expenses - Income tax expense

The EBIT stands for earning before interest and taxes

And, EBIT - income tax expense = Earning after taxes (EAT)

The operating cash flow is the amount which is left after paying all the expenses related to cash

6 0
3 years ago
Which of the following statements is true?a. A country cannot have comparative advantage in producing a certain item if it incur
ss7ja [257]

Answer:

. All countries can gain from trade if they all specialize in production according to comparative advantage

Explanation:

Comparative advantage is when a country produces a product at a lower opportunity cost when compared with its trading partners.

Absolute advantage is when a country produces more quantities of goods and services than its trading partners.

A country can still have comparative advantage in production if opportunity cost is increasing once it's opportunity cost doesn't become greater than that of its trading partners.

A country can have comparative advantage without having absolute advantage.

I hope my answer helps you.

4 0
3 years ago
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