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SSSSS [86.1K]
3 years ago
9

McFann Co. has two divisions, L and H. Division L is the company's low-risk division and would have a WACC of 8% if it were oper

ated as an independent company. Division H is the company's high-risk division and would have a WACC of 14% if it were operated as an independent company. Because the two divisons are the same size, the company has a composite WACC of 11%. Division H is considered a project with an expected return of 12%. Should McFann Co. accept or reject the prject?
A. Accept

B. Reject

On what grounds do you base your accept-reject decision?

A. Division H's project should be accepted, because its return is greater than the risk-based cost of capital for the divison.

B. Division H's project should be rejected, because its return is less than the risk-based cost of capital for the division.
Business
1 answer:
Goshia [24]3 years ago
8 0

Answer:

B. Reject

B. Division H's project should be rejected, because its return is less than the risk-based cost of capital for the division.

Explanation:

As we can see that the project H Weighted average cost of capital is 14% and the expected rate of return is 12%

So based on this its expected rate of return is less than the cost of capital i.e Weighted average cost of capital

Therefore, the project should be rejected as we compared the Weighted average cost of capital and the expected rate of return

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With respect to engineering economics and the internal rate of return (IRR), Descartes’ rule of signs indicates there will be at
Alika [10]

Answer:

''there will be at most as many POSITIVE rates...''

Explanation:

The measure of investments' rate of return which excludes external factors such as inflation is known as Internal Rate of Return(IRR)

It is used in;

(1). Savings and loans.

(2). Liabilities

(3). Fixed incomes

(4). Private equity and capital management.

(5). Maximizing total present value and so on.

It can be calculate using the formula below:

NPV= C(n)/(1+r)^n = 0

That is internal rate of return can be use in solving NPV = 0.

Therefore, 'With respect to engineering economics and the internal rate of return (IRR), Descartes’ rule of signs indicates there will be at most as many POSITIVE rates of return as there are sign changes in the cash flow profile.''

4 0
3 years ago
A man has $34,000 to invest. He invests some of the money at 5% and the balance at 4%. His total annual interest income is $1545
notka56 [123]

Answer:

Amount invested @ 5% = $18,500

Amount invested @ 4% = $34,000 - $18,500 = $15,500

Explanation:

Provided we have the following details,

Total investment = $34,000

Let amount invested @ 5% = x

Then, amount invested at 4% = $34,000 - x

Thus, (x \times 0.05) + (($34,000 - x) \times 0.04) = $1,545

0.05x + $1,360 - 0.04x = $1,545

0.01x = $1,545 - $1,360 = $185

x = $185/0.01 = $18,500

Thus, amount invested @ 5% = $18,500

Amount invested @ 4% = $34,000 - $18,500 = $15,500

7 0
2 years ago
An extremely important use of reports of actual results versus budget projections is:
Irina18 [472]

The answer is<u> "Identifying potentially troublesome areas so that corrective action can be taken".</u>


A budget report is an inward report utilized by the board to think about the assessed, planned projections with the real performance number accomplished amid a period.  

Budgeting and financial forecasting are devices or tools that organizations use to build up an arrangement of where the executives needs to take the organization and whether it's going the correct way. Albeit budgetary determining and planning are frequently utilized together, there are particular contrasts between the two.

8 0
2 years ago
A business usually becomes listed in the Fortune 500 during its _______ stage.
Deffense [45]
A business usually becomes listed in the Fortune 500 during its SUCCESSFUL stage.
Fortune 500 refers to the yearly list of the best and the biggest 500 companies that are doing very well in the US market world as judged by the Fortune Magazine. These companies usually have huge asset balance, which is still growing in size. The major criteria used to choose the qualified companies is the size of their revenues.
7 0
3 years ago
Read 2 more answers
Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets
Jet001 [13]

Answer:

1. $9.07

2. $25.5

Explanation:

(a) Total Cost:

= 260,000 × 60% (Wages and Salaries) + 60,000 × 50% (Other Overhead)

= $186,000

Cost of Wages and Salaries and Other Overheads Charged to Each Bouquet:

= Total Cost ÷ Total Bouquets

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(b) Total Cost:

= 260,000 × 30% (Wages and Salaries) + 60,000 × 40% (Other Overhead)

= $102,000

Cost of Wages and Salaries and Other Overheads Charged to Each Delivery:

= Total Cost ÷ Total Delivery

= $102,000 ÷ 4,000

= $25.5

6 0
3 years ago
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