Even if prices follow a random walk, they still may not be informationally efficient. Explain why this may be true and why it matters for the efficient allocation of capital in our economy.

Q: When the economy is weak, money is spent freely on needs and wants. True False

A: An economy is a large set of interrelated production, consumption, and exchange activities that help…

Q: Why are accruals called spontaneous sources of funds, what are their costs, and why don't firms use…

A: Under the business setting, the spontaneous funds source states to the financing that arises from…

Q: When estimating a weighted average cost of capital, a firm can use either book values or market…

A: Introduction: WACC is nothing but weighted average cost of capital. This is the cost a company…

Q: Which one of the following statements is correct?  A.  If a firm decreases its inventory…

A: Inventory period is based on how much inventory on average you keep on hand and receivable period is…

Q: What does it mean for a market to be "efficient"? Is the market for all stocks equally efficient?…

A: The stock market is the market under which the primary and secondary activities or market is…

Q: Discuss the concepts of adverse selection and moral hazard. Provide an example of each of these…

A: Adverse selection or negative selection describes a situation where the two parties to a transaction…

Q: Which of the following is not an approach to replacement analysis? Solve, a. Cash flow approach b.…

A: Replacement analysis is the study of organizing, reasoning and implementation of successful…

Q: Is this statement true or false? please explain in detail The Discounted Cash Flow method is the…

A: The value of an investment is calculated using the discounted cash flow (DCF) approach based on the…

Q: Relative valuation has several disadvantages. Which of the following is NOT?   a. There is the…

A: In the context of the given question, we are required to find out the correct option from the…

Q: Why do you think Dividend Irrelevance theory is unrealistic?

A: The dividend irrelevance theory was proposed by Merton Miller and Franco Modigliani. According to…

Q: Explain how useful the price mechanism is in tackling the basic economic problem?

A: the main role of price mechanism in basic economic problem is allocate scare resources in market…

Q: If an investment project will positively affect the cash flows of other products the firm currently…

A: Cannibalization can be defined as the negative effect on the existing business line or the product…

Q: Why do most academics and financial executives regard the NPV as being the single best criterion and…

A: NPV is better than IRR and is a single best criterion for capital budgeting decisions because this…

Q: Should firms focus on book value or market value capital structures? How would the calculatedWACC be…

A: In all actuality, the organization will have the option to utilize the capital structure dependent…

Q: Is capital rationing always a bad thing? Explain

A: Capital rationing: Capital rationing is restriction bestowed upon new investments in the…

Q: Does a decrease in the capital requirement ratio always cause anincrease in the value of operations?

A: Capital requirement ratio is the ratio which is generally used by the banks and various financial…

Q: What is the market economy?How dothe financial marketsinteractwith product and labor markets to…

A: The Market economy is an economy model in which all the decision regarding the demand and supply of…

Q: What factors can lead to an increasing marginal cost of capital?How might this affect capital…

A: Following are the factors that lead to an increasing marginal cost of capital: The breakpoint of…

Q: What does it mean for a market to be “efficient”?

A: The market is efficient in the scenario when the stock price in the present market is not…

Q: Ceteris paribus, current financial market returns will increase as

A: Capital goods are those fixed assets for the company which help in the production process. They are…

Q: Why do larger financial intermediaries tend to have lower transaction costs?   A. Diseconomies of…

A: Financial intermediaries minimize exchange costs by leveraging economies of scale, take a toll…

Q: Why would a company choose to factor itsreceivables, given that it will get less money than…

A: Sales means delivery of goods and services by the seller. It can be for cash sales or sales made on…

Q: false?

A: Investment refers to the asset which is invested in the business for building the wealth and saving…

Q: If the APT is to be a useful theory, the number of systematic factors in the economy must be small.…

A: APT (Arbitrage Pricing Theory) Alternative multi-factor assets pricing theory helps in analyzing the…

Q: 3. If inventory turnover decreases, what will happen to the cash conversion cycle? Assume other…

A: Inventory Turnover ratio shows how many times inventory is sold in any particular period. Cash…

Q: This idea states that there will always be someone who is willing to pay for an asset at a higher…

A: Dividend growth model is about determination of market price by using dividend and it's growth.…

Q: Why is "Projecting Growth Beyond What the Capital Being Valued Will Support" considered a common…

A: Income Approach There are two different model which was incurred in the income approach.  The…

Q: Do you think investors should practice dollar cost averaging when investing their money? Why or why…

A: Dollar-Cost Averaging: Dollar-Cost averaging is an investment approach that involves investing an…

Q: Do normal valuation metrics work like P/E, P/B etc., in tech companies or do investment bankers…

A: A startup is a firm that is in its early phases of operation.  These businesses usually start with…

Q: If a company chooses to minimize WACC, what will be the effect on financial flexibility

A: Basic Terms :- Financial flexibility of the firm is the ability of the firm's capital structure to…

Q: Economic conditions impact all asset prices.  If we can accurately determine where we are at in the…

A: Expansion  In simple words, the stage in the business cycle under which an economy starts growing…

Q: What is the major criticism of the payback and simple rate of return methods of making capital…

A: Cash payback method: Cash payback period is the expected time period which is required to recover…

Q: inverted

A: An inverted yield curve is a curve which shows that the company's long term debt instruments have a…

Q: Is it possible that the market for individual stocks could be highly efficient but the market for…

A: We need to use the concept of efficient market hypothesis (EMH) to answer the question. EMH is the…

Q: Why short selling are risky than buying margin?

A: Short selling is riskier than buying on margin.   Short selling is borrowing shares from your broker…

Q: why is knowledge of the money market important for carrying out value maximizing working capital…

A: Introduction: For this question, the importance of working capital which helps to manage the short…

Q: Efficiency in adding value to an asset that is less valued is key to creating wealth. In what…

A: Wealth refers to the measure which determine the value of all the assets which is owned through the…

Q: Why do maximizing EPS and maximizing value not necessarily lead to the same conclusion about the…

A: Earning per share or EPS is referred as the net profit of the corporation, which are divided through…

Q: 1. Why can’t diversification reduce systematic risk? 2. Why are sunk costs excluded when conducting…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.