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- Thompson Trucking has $9 billion in assets, and its tax rate25%. Its basic earning power (BEP) ratio is 20%, and its returnon assets (ROA) is 5.25%. Whatis its time interest earned (TIF)ratio? Round you answer to twodecimal places.Deuk Seon have the following investment centers. Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter. Department Invested Assets Income from Operations Rate of Return on Investment Min. Rate of Return Min. Amt. of Income from Operations Residual Income Taek (a) (b) (c) 16% P128,000 P10,000 Jung Hwan P850,000 P153,000 (d) 12% (e) (f) Sun woo P825,000 (g) 20% (h) (i) P24,000 Dong Ryong (j) P129,000 24% (k) P60,000 (l) (a) Determine the missing items, identifying each by number. (b) Which division is most profitable in terms of income from operations? (c) Which division is most profitable in terms of rate of return on investment?We now have $5,000 in assets and are given a choicebetween investment 1 and investment 2. With investment 1,80% of the time we increase our asset position by $295,000,and 20% of the time we increase our asset position by$95,000. With investment 2, 50% of the time we increaseour asset position by $595,000, and 50% of the time weincrease our asset position by $5,000. Our utility functionfor final asset position x is u(x). We are given the followingvalues for u(x): u(0) 0, u(640,000) .80, u(810,000) .90, u(0) 0, u(90,000) .30, u(1,000,000) 1,u(490,000) .7.a Are we risk-averse, risk-seeking, or risk-neutral?Explain.b Will we prefer investment 1 or investment 2?
- Mid-States is a multi-divisional utility company. Mid-States has fourdivisions with the following betas and proportions of the firm's totalassets:Division Beta % of AssetsElectric & Gas 0.75 45Bus transportation 1.21 20Real estate 2.80 25Recreation 1.85 10The risk-free rate is 2 percent and the return on the stock market as awhole is 15%. If Mid-States is considering a residential development,what should the firm use as its cost of equity in evaluating this project?Assume that the following are the data acquired: Consumption ……………… 200M Imports …………………50M Investment ………………. 55M Deflator ………………..1.20 Government Spending....…..120M Population …………….100M Exports ………………………. 80M Compute for the Nominal GDP.Green Grocers is deciding among two mutually exclusive projects. The two projects have the following cash flows: Year Project A CF Project B CF 0 -$34,139 -$36,502 1 $10,614 $6,107 2 $12,162 $8,946 3 $21,200 $42,600 4 $17,189 $18,174 The company’s weighted average cost of capital is 5.7 percent (WACC = 5.7). What is the What is the net present value (NPV) of the project with the highest internal rate of return (IRR)? Should that project be accepted? Group of answer choices $29,915.68; Yes $27,915.68; No $25,915.68; Yes $25,915.68; No $27,915.68; Yes
- Hatter Inc. has the following capital components and costs. Calculate Hatter's WACC. (The answer choice without supporting calculation will not earn any points). Component Value CostDebt 15,500 10% (after tax)Preferred Stock 7,500 12%Common Equity 10,000 14%Please answer last 3 subparts labeled d, e, f. D. What would be the effect on the ROI of the Tufting Division using your transfer price? Explain. E. Assume that the Backing Division is now selling 2,000,000 square yards per year to retail outlets. What transfer price would you recommend? What will be the effect on corporate profits? F. If the Backing Division is at capacity and decides to sell to the Tufting Division for $3.00 per square yard, what will be the effect on the company's profits?The Sloan Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow(I) Cash Flow(II) 0 –$ 55,000 –$ 18,900 1 25,000 10,150 2 25,000 10,150 3 25,000 10,150 a-1 If the required return is 10 percent, what is the profitability index for both projects? (Do not round intermediate calculations. Round your answers to 3 decimal places, e.g., 32.161.) a-2 If the company applies the profitability index decision rule, which project should the firm accept? Project I Project Il b-1 What is the NPV for both projects? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2 If the company applies the NPV decision rule, which project should it take? Project I Project II
- Consider the following information for Nathan Ltd.: EBIT- Rs.1120 Lakhs, EBT- Rs.320 Lakhs, Fixed Cost- Rs.700 Lakhs Calculate Financial Leverage a. 3.5 b. 1.4 c. 2.5 d. 6.3Adams Inc. has the following data, rRF = 5%, RPm = 6% and Beta = 1.05. What is the firms cost of common from reinvested earning using CAPM? (11.30%, 12.72%, 11.64%, 11.99%, and 12.35%)The management of Bhytyu Limited are considering several mutually exclusive projects with characteristics as shown in the following table. Project A B C D E Initial Cost ($ millions) 87 121 91 95 118 Accounting rate of return 13% 13% 15% 22% 11% Net Present Value ($ millions) 0 11 -1 7 10 Payback Period (Years) 3 5 7 3 5 Internal Rate of Return 9.5% 13.2% 8.0% 11.7% 12.5% Management’s stated goal is to maximise the wealth of the firm’s owners, and to be accepted any investment project must have a minimum investment yield of 10%. Required: Which of the above projects, if any, should be selected by management? Explain the rationale for your choice.