changes in the short run. Short-run price changes occur independently of information reaching the market. On average‚ most securities are mis-priced. In the absence of legal constraints‚ investors with inside information are not able to earn excess returns. (2 marks) ---------------------------------------------------------------------------------------------------------------2. If a firm’s share price decreased during the past week‚ what is the best forecast that one can make about this week’s price
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per employee Earnings per hour for employees Annual health benefits per employee Other annual benefits per employee-% of wages Cost of raw materials per can Other variable production costs per can Costs to purchase cans - per can Required rate of return Tax rate Clark Paints $200‚000 5 $40‚000 5‚500‚000 1‚100‚000 0 3 2‚000 $12.00 $2‚500 18% $0.25 $0.05 $0.45 12% 35% Make Purchase Cost to produce Annual cost of direct material: Need of 1‚100‚000 cans per year Annual cost of direct labor for
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98>18.79). If the projects are independent we will choose both. C - 3 The NPV will change if the WACC change; if the WACC increases the NPV will decrease on the other hand if the WACC decreases the NPV will increase. D – 1 Internal rate of return (IRR) is the discount rate that forces PV inflows equal to cost‚ and the NPV = 0. IRR using excel for project L: IRR 18.13% For project S: IRR 23.6% D – 2 A project IRR is the same as a bond’s YTM. The YTM on the bond would
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Indian Industry (D) None of the above 5. The factors affecting to P/E multiple are (A) Dividend pay-out ratio and required return (B) Required return and expected growth rate (C) Dividend pay-out ratio and expected growth rate (D) Dividend pay-out ratio‚ required return and expected growth rate 6. Which of the following is not one of the benefits of E-Commerce ? (A) E-Commerce offers greater flexibility in meeting consumer needs
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cover the cost and provide enough returns to the shareholders. In the case of a negative NPV‚ the investment should not be supported. Through a focus on NPV results of both projects we can conclude that the first project‚ MMDC will create a larger value for the firm since its NPV is higher: 7‚150$ and DYOD 7‚056$. We consider in our case that the difference is negligible and both can be considered as projects which create considerable value. The Internal rate of return is important to analyze since it
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Some selection rules for both methods are listed below: - Non-discounting criteria Accept Reject Pay Back Period (PBP) PBP < target period PBP >target period Accounting Rate of Return (ARR) ARR > target rate ARR < target rate Discounting criteria Accept Reject Net Present Value (NPV) NPV > 0 NPV < 0 Internal Rate of Return (IRR) IRR > cost of capital IRR < cost of capital Benefit- Cost Ratio (BCR) BCR >1 BCR < 1 Implementation The implementation phase for an industrial project‚ which involves
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corporate finance (2010‚ P. 203-204). In order to determine if Bethesda Mine should open‚ a thorough analysis of the payback period‚ profitability index‚ average accounting return‚ net present value‚ internal rate of return‚ and the modified internal rate of return have been conducted. Table 1. Cash flow on Investment Tax rate= 38% Year 0 Cash flow (outflow) on investment Opportunity cost of using land= $7‚000‚000 Cost of equipment= $85‚000‚000 Total $92‚000‚000 Table 2.
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1. This is a measure summarizing the overall past performance of an investment. Average Return 2. This includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment. Dollar Return 3. Which of these statements is true? When people purchase a stock‚ the do not know their return‚ neither the short term nor the long-term. 4. This is the volatility of the investment‚ which includes firm-specific risk as well as market risk. Total risk 5. This
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future Investment Appraisal: Is a process of evaluating the attractiveness of an investment proposal using various techniques/methods‚ Methods Payback period Accounting rate of return (ARR – ROCE) Investment appraisal Internal rate of return (IRR) Pay Back Period (PBP) The Payback Period (PBP) - The time taken by the project to repay the investment or The time taken where‚ Cash inflows = Cash Outflows * Usually expressed in years
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degrees of operation between all divisions. Strategy Enager has experienced rapid growth in its early stages‚ which has contributed towards its current success. As of 1992‚ they attained a gross return on assets of 9.3 percent. In the eyes of Henry Hubbard‚ the Chief Financial Officer‚ gross return on assets for Enager should be reaching levels of above 12 percent for all divisions of the company. In 1992 the company changed the objectives and performance evaluations of each division from profit
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