Answer:
I) The firm will reject good low-risk projects
II) The firm will accept poor high-risk projects
Explanation:
<h2>Cost of Capital:</h2>
- The required return on the existing firm assets. It is based on the risk of assets.
- The risk of firm’s overall assets is equal to the weighted average risks of firm’s debt, preferred stock and common equity.
- The cost of capital of a firm equals the weighted average of the cost of debt, the cost of preferred stock, and the cost of common equity
Each project has different risk profiles, using one cost of capital for project evaluation might provide misleading results and the investor or company may end up accepting high risk projects or may reject low risk good projects.
Answer:
horizontal linkage
Explanation:
In a value chain horizontal linkages involve cooperation among different departments aimed at building interdependence, trust, and resource pooling in order to achieve a set goal.
It is made up of relationships between people or department that are equal in an organisation.
Shared development innovations are more easily implemented by using the horizontal linkage model. Participants are more willing to express themselves freely and work collaboratively to achieve set goals.
Answer:
$313,288.16
Explanation:
Present value is the sum of discounted cash flows
present value can be calculated using a financial calculator
Cash flow in year 1 and 2 = 0
Cash flow in year 3 to 7 = $10,000
I = 10%
Present value = $313,288.16
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
Answer:
4, 992,000 shares
Explanation:
Amount that need to be raised: $600
flotation cost 4 percent:
Actual flotation cost: =4/100 x $600
=0.04 x $600
=$24 million
Total amount that must be arise = $600 +$24
=$624
Value per share $125
Number of shares need to raise $624million = $624,000,000/$125
=4, 992,000 shares
