Coyote Inc operates three divisions. One division involves significant research and development,
and thus has a high-risk cost of capital of 15%.
The second division operates in business segments
related to Coyote's core business, and this division has a cost of capital of 10% based upon its risk.
Coyote's core business is the least risky segment, with a cost of capital of 8%. The firm's overall
weighted average cost of capital of 11% has been used to evaluate capital budgeting projects for all
three divisions. This approach will
A) favor projects in the core business division because that division is the least risky.
B) favor projects in the research and development division because the higher risk projects look
more favorable if a lower cost of capital is used to evaluate them.
C) not favor any division over the other because they all use the same company-wide weighted
average cost of capital.
D) favor projects in the related businesses division because the cost of capital for this division is
the closest to the firm's weighted average cost of capital.
B
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When bonds are intended to be held to maturity, they are accounted for at
A) fair value. B) cost. C) fair value adjusted for the amortization of their discount or premium. D) cost adjusted for the amortization of their discount or premium.
Zhenyu, a manager at Finertech Inc, needs to inform an employee who reports to him that he was not considered for a promotion. He intends to use a channel of communication that will allow him a great degree of control over his message. In this scenario, which of the following channels of communication should Zhenyu use??
A) ?A written channel B) ?A visual channel C) ?A nonverbal channel D) ?A kinesic channel
Operational linkages are
A. connections that outline contractual obligations. B. direct ties between the internal operations of buyer and seller firms. C. changes in a firm's product or procedures that are unique to its relationship partner. D. services that link a buyer's production and purchasing departments. E. means to elaborately increase inventory costs.
Last year Altman Corp. had $205,000 of assets, $303,500 of sales, $18,250 of net income, and a debt-to-total-assets ratio of 41%. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to $152,500. Sales, costs, and net income would not be affected, and the firm would maintain the 41% debt ratio. By how much would the reduction in assets improve the ROE?
A. 4.69% B. 4.93% C. 5.19% D. 5.45% E. 5.73%