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3 years ago

An all-equity firm is considering the following projects:

Business

1 answer:

FromTheMoon [43]3 years ago

4 0

Answer:

Projects Y and Z

b. Projects W and Z

c. Projects W and Y

Explanation:

CAPM equation : Expected return = Risk free rate + Beta x (Expected market return - Risk free rate)

W = 4% + [0.85 x (11% - 4%)] = 9.95%

X = 4% + (0.92 x 7%) = 10.44%

Y = 4% + (1.09 x 7%) = 11.63%

Z = 4% + (1.35 x 7%) = 13.45%

Projects Y and Z have an expected return greater than 11%

b. Projects W and Z should be accepted because its expected return is higher than the IRR

c. Project W would be incorrectly rejected because the expected rate of return is less than the overall cost of capital (i.e. 9.95 is less than 11). But its expected rate of return is greater than the IRR

Y would be incorrectly accepted because its expected rate of return is greater than the overall cost of capital but its expected rate of return is less than the IRR

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1. The marginal propensity to consume I. has a negative relationship to the multiplier. II. is equal to 1. III. represents the p

Flauer [41]

Answer: c. III only

Explanation:

The marginal propensity to consume (mpc) measures the proportion of a consumers income that is spent.

The marginal propensity to save (mps) measures the proportion of a consumers income that is saved.

It is usually assumed that disposable income is either saved or spent, so mps + mpc = 1

The multiplier is measured as : 1 / MPS or 1 / (1-MPC)

the MPC has a positive relationship with the multiplier.

6 0

4 years ago

A factory costs $400,000. It will produce an inflow after operating costs of $100 000 in year 1. $ 200,000 in year 2, and $ 300,

Delvig [45]

Answer:

NPV = $62,258.56

Explanation:

initial outlay year 0 = $400,000

cash inflow year 1 = $100,000

cash inflow year 2 = $200,000

cash inflow year 3 = $300,000

discount rate = 12%

using a financial calculator, NPV = $62,258.56

if you do it by hand:

NPV = -$400,000 + $100,000/1.12 + $200,000/1.12² + $300,000/1.12³ = -$400,000 + $89,285.71 + $159,438.78 + $213,534.07 = $62,258.56

3 0

3 years ago

What is one of the first decisions an entrepreneur must make answer.com?

defon

To make money you have to spend money

5 0

3 years ago

Esquire Comic Book Company had income before tax of $1,700,000 in 2016 before considering the following material items:

marshall27 [118]

Answer:

Esquire Comic Book Company

Income Statement

For the Year Ended December 31, 2016

Income from continuing operations $1,700,000

Restructuring costs ($75,000)

Income form continuing operations before taxes $1,625,000

Income taxes ($650,000)

Net income from continuing operations $975,000

Discontinued operations:

Income from discontinued operations $640,000

Loss on disposal of division ($420,000)

Income from discontinued operations before taxes $220,000

Income taxes ($88,000)

Net income from discontinued operations $132,000

Total net income $1,107,000

7 0

4 years ago

What is the value today of receiving $5,000 at the end of six years, assuming an interest rate of 8% compounded semiannually?

Ulleksa [173]

Answer:

$3,122.96

Explanation:

Future value = 5000

i = 8%

n = 6

m = 2

Present Value = FV(1+i/m)^mn

Present Value = 5,000(1+0.08/2)^-2*6

Present Value = 5,000(1.04)^-12

Present Value = 5,000 / (1.04)^12

Present Value = 5,000 / 1.6010322

Present Value = 3122.985284118583

Present Value = $3,122.96

6 0

3 years ago