a. Consider two investment opportunities A and B. Investment A: Expected return =0.08, Standard deviation = 0.06 Investment B: Expected return = 0.24, Standard deviation 0.08 Which investment would you choose A or B? Provide the rationale behind your decision. b. If company is selecting projects with the negative NPV, what impact this decision would have on the share price of the company c. While forecasting future sales, internal sales forecast is more appropriate or external sales forecast? d. Why are dividends the basis for the valuation of common stock? e. When the constant growth dividend valuation model is used to explain a stock's current price, the quantity (ke - g) represents the expected dividend yield. Is this statement right or wrong? Explain.

a. Consider two investment opportunities A and B. Investment A: Expected return =0.08, Standard deviation = 0.06 Investment B: Expected return = 0.24, Standard deviation 0.08 Which investment would you choose A or B? Provide the rationale behind your decision. b. If company is selecting projects with the negative NPV, what impact this decision would have on the share price of the company c. While forecasting future sales, internal sales forecast is more appropriate or external sales forecast? d. Why are dividends the basis for the valuation of common stock? e. When the constant growth dividend valuation model is used to explain a stock's current price, the quantity (ke - g) represents the expected dividend yield. Is this statement right or wrong? Explain.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 4EP

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