<span>Obviously, the broker is subtly encouraging their clients to buy more stocks. Particularly, when they call with news of stocks that rose more than 10 percents, this will probably motivate people to think the stock is doing well and they want to "get in on the action" while they still can. Even if their calls when a stock goes below 3 percent might encourage some people to sell, the increase of three percents (combined with the 10 percent calls) would definitely be influence to buy.</span>
Answer:
Project Size IRR
A $650,000 14.0%
B 1,050,000 13.5
C 1,000,000 11.2
D 1,200,000 11.0
Explanation:
Based on the information given the set of projects that should be accepted should be the project that has higher Internal rate of return (IRR) than the Weighted average cost of capital (WACC) percentage of 10.8% . Hence, the set of projects that should be accepted are: Project A,B,C,D
Project Size IRR
A $650,000 14.0%
B 1,050,000 13.5
C 1,000,000 11.2
D 1,200,000 11.0
Total $3,900,000
Based on the above we can see that Project A,B,C,D has a total of $3,900,000 which is higher than the retained earnings amount of $2,500,000.
Therefore the set of projects that should be accepted should be Project A,B,C,D
Answer:
Sunk cost
Explanation:
Sunk cost is cost that has already been incurred and cannot be recovered. It should not be considered when making future decisions
Differential cost refers is difference between the cost of two different decisions.
Replacement cost is a the cost incurred in replacing an essential asset.
Answer:
14.29% or higher
Explanation:
Municipal bonds interest rates are tax free. Corporate bond rates however are have tac benefits through tax shield.
The formula for aftertax corporate bond rate = pretax rate(1-tax)
pretax rate = 7% or 0.07 as a decimal
aftertax rate(to be indifferent between the two) = 6% or 0.6
In order to be indifferent, the tax rate would be;
0.07 ( 1- tax ) = 0.06
0.07 - 0.07tax = 0.06
0.07 - 0.06 = 0.07tax
0.01 / 0.07 = tax
tax = 0.1429 or 14.29%
Therefore, Investors with a tax rate of 14.29% or higher would prefer the municipal bond.
Answer:
The 3 represents the percentage of cash discount. It means the cardholder will receive a 3% discount if the bill is paid within 15 days from the billing date.
