The level of detail in a model should not depend on the application. For example, for regular work you may forecast depreciation using a growth rate, a percentage of sales, or PP&E. Choices: True or False
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Q24. The level of detail in a model should not depend on the application. For example, for regular work you may
Choices:
True or False
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Solved in 2 steps
- QB: .Determine the covariance between assets R and S with the following data: State Prob Return J Return S Boom 0.1 16 22 Recession 0.2 -7 -4 Normal 0.4 12 11 Recovery 0.1 11 16 Slow Growth 0.2 14 20 Is it advisable to diversify?1. Which machine should be selected using the Payback period method? 2. Which machine should be selected using the Accounting rate of return based on the net investment method? 3. Which machine should be selected using the Internal rate of return method? 4.Which machine should be selected using the Net present value, (cost of capital = 10%) method? 5.Which machine should be selected using the Net present value, (cost of capital = 12%) method?1. All projects with positive NPVs should be accepted and those with negative NPVs should be rejected. Comment2. Economic value of a company's assets corresponds to present value of asset cash flows and present value of terminal value. Comment3. When valuing companies it is necessary at valuation date to take as disbursement investment in Net Operating Working Capital (known as NOWC). Latter is estimated as product between annual sales of current period and CTON ratio (known as NOWCR). Comment.
- If the profit margin is 0.2158, asset turnover is 0.5389 and financial leverage is 1.2047, what is the return on asset? Multiple Choice 0.5389 0.1163 0.1401 0.6492Assume the following ratios areconstant: Total asset turnover 2.8Profit margin 6.8 % Equitymultiplier 2 Payout ratio 30 %What is the sustainable growthrate? (Do not round intermediate Training calcMT480M4-4: Assess investment options based upon cost of capital and expected returns. The assessment requires the application of the net present value (NPV) model to assess investment options given cost of capital, commonly referred to as discount rates, and required rates of returns. You will explain the role of a discount rate in evaluating the NPV model and compare investment options as cost of capital increases or decreases. The use of a financial calculator and/or Excel will be required for this part of the assessment. Read the scenario and address all of the checklist items. Scenario: A new product manager presents to you, the chief financial officer, a proposal to expand operations that includes the purchase of a new machine. The product manager is certain that the positive cash flows, which exceed the initial outlay by $20,000 by the end of Year 4, will bring both praise and approval. You explain the company uses a 12% discount rate for cash flows and project-related budgeting.…
- Q25 Which of the following is not a source of valuation related information? a. Reports on utilization of resources b. Stock market statistics c. Board discussion papers d. Relevant economic dataQuestion 3 Assume you are given the following information regarding the expected returns for an asset, for different states of the economy. Show work for all parts requiring computation. state. probability expected return Recession 0.1 -0.04 normal 0.5 0.07 expansion 0.4 0.12 What is the expected return for the asset? What is the standard deviation of returns for the asset?Use the information from this table to find the covariance for each asset. State of Economy Probability of State Return on Asset J Return on Asset K Boom 30% 5% 24% Growth 40% 5% 12% Stagnant 20% 5% 4% Recession 10% 5% -10%
- Use the information from this table to find the standard deviation for each asset. State of Economy Probability of State Return on Asset J Return on Asset K Boom 30% 5% 24% Growth 40% 5% 12% Stagnant 20% 5% 4% Recession 10% 5% -10%28- Which one of the following indicates that a project is expected to NOT createvalue for its owners? a. Positive average accounting rate of returnb. Profitability Index greater than 10c. Internal rate of return that is smaller than the required rate of returnd. Positive net present valuee. Payback period shorter than the requirement29. Which one of the following statements is correct regarding capital Investment appraisal methods?a) The Payback period takes into account all the cash flows accruing to the projectb) The Net Present value method does not take the time value of money into accountc) The Accounting Rate of Return takes the time value of cash flows into consideration and is the one most often used in practice by business organisationsd) The Internal Rate of Return is the discount rate at which the net present value is zero