Answer:
The answer is "The end of the Ice Age."
Explanation:
Answer:
False
Explanation:
The first part was true. A higher WACC results in a lower NPV simply because a higher discount rate results in a lower present value.
E.g. 100 / (1 + 6%)³ = 83.96, but if we increase r to 10%, then 100 / (1 + 10%)³ = 75.13
The second part is wrong because under the IRR method, the decision rule is very simple, all projects are accepted if their IRR is higher than the project's WACC (or discount rate). I.e. if hte project's WACC increases, so does the chance of the project being rejected because the IRR might be lower than the WACC.
Answer:
Current price of the stock of Jameson company is $18.62. Therefore, the correct option is A
Explanation:
The formula of required rate of return is:
Required rate of return = Risk free rate + Beta × Market risk premium
= 4% + 1.15 × 5%
= 4% 5.75%
= 9.75%
Computation of current stock price is:
Current stock price = Expected dividend per share / (Required rate of return - Growth in dividend)
= (0.75 + [5.50% × 0.75] ) / (0.0975 - 0.055)
= 0.79125 / 0.0425
= $18.62
