For a stock to be in equilibrium, two conditions are necessary: (1) The stock's market price must equal its intrinsic value as seen by the marginal investor and (2) the expected return as seen by the marginal investor must equal this investor's required return.
Answer the following statement true (T) or false (F)
True
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Which sentence uses correct capitalization?
A) She and I were students in the online business program at DeVry university. B) she and i were students in the online business program at DeVry University. C) She and I were students in the online business program at DeVry University.
Under the original Federal Trade Commission Act of 1914, the FTC
A. could not enforce antitrust laws or protect major competitors from one another. B. was given the power to issue cease-and-desist orders against firms engaging in deceptive practices. C. could not prohibit false advertising unless there was evidence of injury to a competitor. D. was given the power to pursue corrective advertising remedies to deceptive practices. E. was given the power to regulate all false and deceptive advertising practices that might injure competition or mislead consumers.
For purposes of shareholders meetings, what is considered a majority vote?
A. The majority of the shares represented at a shareholder meeting where there is a quorum. B. The vote of ½ of all outstanding shareholders. C. The vote of 90 percent of shareholders who make up a quorum. D. The vote of 2/3 of all outstanding shareholders. E. The vote of at least 10 percent of shareholders total.
If the outlay is lower by the amount that Simpson suggests, the project NPV should increase by an amount closest to:
Barbara Simpson is a sell-side analyst with Smith Riccardi Securities. Simpson covers the pharmaceutical industry. One of the companies she follows, Bayonne Pharma, is evaluating a regional distribution center. The financial predictions for the project are as follows: Fixed capital outlay is h1.50 billion. Investment in net working capital is h0.40 billion. Straight-line depreciation is over a six-year period with zero salvage value. Project life is 12 years. Additional annual revenues are h0.10 billion. Annual cash operating expenses are reduced by h0.25 billion. The capital equipment is sold for h0.50 billion in 12 years. Tax rate is 40 percent. Required rate of return is 12 percent. 24 Learning Outcomes, Summary Overview, and Problems part-i-02 13 January 2012; 10:13:23 Simpson is evaluating this investment to see whether it has the potential to affect Bayonne Pharma’s stock price. Simpson estimates the NPV of the project to be h0.41 billion, which should increase the value of the company. Simpson is evaluating the effects of other changes to her capital budgeting assumptions. She wants to know the effect of a switch from straight-line to accelerated depreciation on the company’s operating income and the project’s NPV. She also believes that the initial outlay might be much smaller than initially assumed. Specifically, she thinks the outlay for fixed capital might be h0.24 billion lower, with no change in salvage value. When reviewing her work, Simpson’s supervisor provides the following comments. “I note that you are relying heavily on the NPV approach to valuing the investment decision. I don’t think you should use an IRR because of the multiple IRR problem that is likely to arise with the Bayonne Pharma project. However, the equivalent annual annuity would be a more appropriate measure to use for the project than the NPV. I suggest that you compute an EAA.” A. €O.09 billion. B. €O.14 billion. C. €O.17 billion.