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Comparable ratios are the only way to measure horizon value. True-(Answered)

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Question

Comparable ratios are the only way to measure horizon value.

?True

?False

Enterprise value measures the net cost of acquiring the debt

?True

?False

TBS's working capital policy is to have a large investment in current assets and to use a small amount of short-term debt. As a result, part of their temporary current assets are financed with long-term debt. TBS has a (an) ______ working capital policy.

A.

Conservative

B.

Aggressive

C.

Moderate (matching)

Tali is considering a new project. The project will generate revenues of $16 million and operating costs of $9,000,000 annually for the next 5 years. Interest expense is $1,000,000 per year. It requires an additional machine that costs $15 million dollars and will be fully depreciated (to a zero book value) on a straight?line basis over 5 years. The machine has a salvage value of $2,000,000. Tali's tax rate is 30%. The beta of the project is 1.10. The risk-free return is 5% and the return on the market is 15%. What is the net present value of the project?

A.

2,317,039

B.

4,657,461

C.

2,365,456

D.

4,943,129

E.

2,651,124


Which of the following is an advantage of comparable measures?

A.

It is easy to incorporate firm-specific information

B.

It incorporates what you can do with the asset

C.

It relies on comparable accounting measures

D.

It contains market information on the value


With the weighted average cost of capital, the impact of interest expense is picked up in

A.

The cash flows

B.

An adjustment at the end

C.

The discount rate

Which method values equity instead of the entire firm?

A.

Adjusted present value

B.

Weighted average cost of capital

C.

Flow to equity




 

Paper#9209530 | Written in 27-Jul-2016

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