Recent Question

Assuming that purchasing power parity (PPP) holds, what is the current exchange rate i. Suppose exchange rates between U.S. dollars and Swiss francs is SF 1.41 = $1.00 and the exchange rate between the U.S. dollar and the German mark is $1.00 = 1.64 DM. What is the cross-rate of Swiss francs to German marks? a. 2.27 b. 1.41 c. 1.64 d. 0.43 e. 0.86 ii. A box of candy costs 28.80 Swiss francs in Switzerland and $20 in the Unite ...

Other / Other 20 May 2016

Based on the FTC’s argument and its mission to challenge merger that would likely lead to higher prices, do you think it allowed the merger 1. In the United States, the Federal Trade Commission (FTC) is charged with promoting competition and challenging mergers that would likely lead to higher prices. In 1996, Staples and Office Depot, two of the largest office supply superstores, announced their agreement to merge. a. Some cri ...

Other / Other 20 May 2016

Stock A has a price of $25 per share, while Stock B has a price of $40 per share. Which of the following statements is most correct 1. Stock A has a required return of 10 percent. Its dividend is expected to grow at a constant rate of 7 percent per year. Stock B has a required return of 12 percent. Its dividend is expected to grow at a constant rate of 9 percent per year. Stock A has a price of $25 per share, while Stock B has a pric ...

Other / Other 20 May 2016

What is the firm’s component cost of debt for purposes of calculating the WACC 1. Wyden Brothers has no retained earnings. The company uses the CAPM to calculate the cost of equity capital. The company’s capital structure consists of common stock, preferred stock, and debt. Which of the following events will reduce the company’s WACC? a. A reduction in the market risk premium. b. An increase in the flotation ...

Other / Other 20 May 2016

The problem of dilution never arises with call options, but it can arise with warrants. i. Leasing is typically a financing decision and not a capital budgeting decision. Thus, the availability of lease financing cannot affect the capital budgeting decision. a. True b. False ii. The full amount of a lease payment is tax deductible if the contract is a genuine lease. a. True b. False iii. The riskiness of the cash flows to the les ...

Other / Other 20 May 2016

If Denver’s cost of capital is 15 percent, which project would you choose 1. Coughlin Motors is considering a project with the following expected cash flows: Project Year Cash Flow 0 -$700 million 1 200 million 2 370 million 3 225 million 4 700 million The project’s WACC is 10 percent. What is the project’s discounted payback? a. 3.15 years b. 4.09 years c. 1.62 years d. 3.09 years 2 ...

Other / Other 20 May 2016

Bill wants as much total revenue as possible. Which price would he choose 1. Bob, Bill, Ben, and Brad Baxter have just made a documentary movie about their basketball team. They are thinking about making the movie available for download on the Internet, and they can act as a single-price monopolist if they choose to. Each time the movie is downloaded, their Internet service provider charges them a fee of $4. The Baxter brothers are ar ...

Other / Other 20 May 2016

If one U.S. dollar buys 1.64 German deutsche marks, how many dollars can you purchase for one German mark i. When the value of the U.S. dollar appreciates against another country's currency, we may purchase more of the foreign currency per dollar. a. True b. False ii. Which of the following are reasons why companies move into international operations? a. To take advantage of lower production costs in regions of inexpensive labo ...

Other / Other 20 May 2016

Determine the quantity of framing, glass, and backing that is to be purchased during August 1) Picture Pretty manufactures picture frames. Sales for August are expected to be 10,000 units of various sizes. Historically, the average frame requires four feet of framing, one square foot of glass, and two square feet of backing. Beginning inventory includes 1,500 feet of framing, 500 square feet of glass, and 500 square feet of backing. Curren ...

Other / Other 20 May 2016

If the movie theater charges $10, who will buy movie tickets and what will the movie theater’s profit be 1. The movie theater in Collegetown serves two kinds of customers: students and professors. There are 900 students and 100 professors in Collegetown. Each student’s willingness to pay for a movie ticket is $5. Each professor’s willingness to pay for a movie ticket is $10. Each will buy at most one ticket. The mov ...

Other / Other 20 May 2016