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NeX [460]
3 years ago
10

Norris Enterprises, an all-equity firm, has a beta of 2.0. The chief financial officer 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 the firm's 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. The project should definitely be accepted because its expected return (before any risk adjustments) is greater than its required return.
c. The project should definitely be rejected because its expected return (before risk adjustment) is less than its required return.
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.
Business
1 answer:
Genrish500 [490]3 years ago
4 0

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.

Explanation:

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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If you had invested $100 in 1972 in the 500 stocks of the s&p500 index, how much would you have had in 2018?.
ANEK [815]

If you had invested $100 in 1972 in the 500 stocks of the s&p500 index $1,612

<h3>What is stocks ?</h3>

A stock is a type of investment that represents ownership in a portion of the issuing company and is commonly referred to as equity. Owners of shares, often referred to as units of stock, are entitled to a portion of the company's assets and earnings in proportion to the number of shares they own.

The majority of private investors base their portfolios on equities, which are often bought and sold on stock exchanges. Stock trades must adhere to government regulations intended to protect investors from deceptive practices.

A sort of instrument known as a stock, which is commonly exchanged on stock exchanges, represents the holder's ownership interest in the issuing company.

Corporations issue stock as a means of raising capital to fund their operations.

Common are the two main stock classifications.

The two primary stock categories are common and preferred.

To learn more about stocks  from the given link:

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4 0
1 year ago
The cash effects of transactions that create revenues and expenses are
iren [92.7K]

Answer:

The cash effects of transactions that create revenues and expenses are operating activities.

Explanation:

Operating activities are useful to stable the business and they are mostly based on cash transactions. Business need cash for their daily operational activities.

6 0
3 years ago
Hugh has the choice between investing in a city of heflin bond at 6.60 percent investing in a surething bond at 10.00 percent. a
butalik [34]

Answer: Surething Inc, needs to issue bonds with 11% interest rate in order to make Hugh indifferent between investing in two bonds.

We arrive at the answer in the following manner:

The City of Helfin bonds are municipal bonds and hence they are tax free. This means that Hugh will get an after - tax return of 6.6%.

The bonds of Surething Inc offering a 10% interest, however are taxed at 40%. So, the current after-tax returns of the bond is:

After - tax return= Pre- tax return * (1 -tax rate)

After-tax return= 0.1 * (1-0.4)

Current after tax return = 0.06 or 6%

However Hugh will be indifferent to investing in these two bonds only if they offer the same after-tax return of 6.6%.

Given this, we can calculate the indifference rate as follows:

After - tax return= Pre- tax return * (1 -tax rate)

0.066= Pre- tax return * (1 -0.4)

\frac{0.066}{0.6}= Pre-tax return

Pre-tax return = 0.11 or 11%.

8 0
3 years ago
Accounting: explain the weakness in internal control and identify the internal control principle that violated?1. Each week, Kat
natita [175]

Answer:

1.Each week, Katja leaves 100 company checks in an unmarked envelope on a shelf behind the cash register.

physical controls

2.The store manager personally approves all payments before signing and issuing checks.

segregation of duties

3.The company checks are unnumbered.

documentation procedures

4.After payment, bills are “filed” in a paid invoice folder.

documentation procedures

5.The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.

independent internal verification

Explanation:

1.Each week, Katja leaves 100 company checks in an unmarked envelope on a shelf behind the cash register.

physical controls

2.The store manager personally approves all payments before signing and issuing checks.

segregation of duties

3.The company checks are unnumbered.

documentation procedures

4.After payment, bills are “filed” in a paid invoice folder.

documentation procedures

5.The company accountant prepares the bank reconciliation and reports any discrepancies to the owner.

independent internal verification

7 0
3 years ago
Training is the hidden cost associated with ERP implementations that is considered the most under-estimated.
algol [13]

Answer:

TRUE

Explanation:

Training is the hidden cost associated with ERP implementations that is considered the most under-estimated because at the initial stage of Enterprise resource planning software purchase, only the cost of purchase and installation is considered. However the software cannot be used without training the users on how to use the software.

Such training costs are sometimes as significant as 25% or more of the cost of the software and these costs are not included in the list price of the purchase of the ERP. Furthermore even when the training costs are estimated, they are often under-estimated as the number of users may increase with time as the organisation grows.

4 0
3 years ago
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