which company is offering the better deal

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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QA) choose the correct answer:

1. Toyota is offering free credit on a new $10,000 car. You pay $1,000 down and then $200 a month for the next 50 months. Nissan Motors next door does not offer free credit but will give you $9000 cash. If the rate of interest is 0.63% a month, which company is offering the better deal?

Select one:

a. Nissan 9556 Cash
b. Nissan- 9000 Cash
c. Toyota- 9556 Cash
d. Toyota- 9000 cash
 

2. Garmin company forecasts to pay a $20.00 dividend next year, which represents 100% of its earnings.  This will provide investors with a 13% expected return.  Instead, we decide to plow back 40% of the earnings at the firm’s current return on equity of 10%.  What is the value of the stock before and after the plow back decision?

Select one:
a. Before- 133.33, After- 153.8
b. Before- 1333.3, After- 1538.8
c. Before- 100.33, After- 143.8
d. Before- 153.8, After- 133.33
 
3. Based on the information below  which projects will we choose based on weighted average profitabiltity Index if we only have OMR500,000 to invest?

Select one:

Project

NPV

Investment

PI

A

130,000

200,000

 

B

241,250

225,000

 

C

294,250

275,000

 

D

262,000

250,000

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