Answer:
The correct answer is D. 10.00%
Explanation:
To get internal rate of return we use excel or a spreadsheet. See document attached.
Make the cash flow to solve this problem. At moment 0 we have the investment cost , in this case $1.475.668 (negative) From period 1 to period 5, we have different incomes o benefits. Salvage value is 1.615.205, we are going to get it at moment 5 (positive).
Then, we calculate the Net cash flow that is the difference between benefits and cost.
We use all the result (positive and negative) in Net cash flow to get the IRR.
Net Present Value (NPV) 768907
Internal Rate of Return (IRR) 10,00%
Answer:
Carter Co. has greater financial risk as compared to Sunny Co. and to the average financial risk in the industry.
Explanation:
Since the industry average is 3.20
Provided Debt to Equity is
Sunny Co. 4.00
Carter Co. 6.00
Since debt to equity represents the financial risk associated with the product.
It is clear that both the companies are on a higher financial risk than that of the industry.
Further the company is still in a better position than that of the competitor, as the later has higher debt to equity ratio.
Therefore, the first statement concluding that the financial risk of Carter Co. is highest of all including the competitor and the industry average is True.
