A Cost Reduction Investment in capital will cost your company $1 million. Which of the options below provides the best return on investment? a. Current sales units 20,000. Prime Cost reduced from $185 to $134. b. Current sales units 40,000. Prime Cost reduced from $99 to $63. c. Current sales units 6,000. Prime Cost reduced from $600 to $487. d. Current sale units 10,000. Prime Cost reduced from $487 to $424
A Cost Reduction Investment in capital will cost your company $1 million. Which of the options below provides the best return on investment? a. Current sales units 20,000. Prime Cost reduced from $185 to $134. b. Current sales units 40,000. Prime Cost reduced from $99 to $63. c. Current sales units 6,000. Prime Cost reduced from $600 to $487. d. Current sale units 10,000. Prime Cost reduced from $487 to $424
Chapter12: Corporate Valuation And Financial Planning
Section: Chapter Questions
Problem 2STP
Related questions
Question
1. A Cost Reduction Investment in capital will cost your company $1 million. Which of the options below provides the best return on investment?
a. Current sales units 20,000. Prime Cost reduced from $185 to $134.b. Current sales units 40,000. Prime Cost reduced from $99 to $63.
c. Current sales units 6,000. Prime Cost reduced from $600 to $487.
d. Current sale units 10,000. Prime Cost reduced from $487 to $424
2. What is the primary reason for the higher cost of finance from shareholders than debt?
a. Shareholders receive dividends every year, so the company has to factor this in, whereas interest payments on loans are optional.
b. The assumption in the question is incorrect - banks always charge businesses more than shareholders.
c. Shareholders are greedy
d. Shareholders take on more risk and therefore require a higher return on their investment
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