When developing an effective questionnaire, asking for "old" information always results in sound data
Indicate whether the statement is true or false
False
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The ______________________________ manager usually performs major buying activities as well as the required administrative duties of running a department
Fill in the blank(s) with correct word
Which of the following statements might be considered poor advice in budgeting?
A) Set realistic budget goals. B) Stick to simple procedures. C) Use the budget primarily as a record-keeping device. D) Use the budget to direct and control expenses.
Which of the following is true of the investment function of finance??
A. ?Investment function determines the most socially responsible behavior of the corporations B. ?Investment function determines the values, risks, and returns associated with financial assets as stocks and bonds. C. ?Investment function determines the optimal mix of securities based on the environment friendly behavior of the corporations. D. ?Investment function determines the regulations applicable to a public corporation. E. ?Investment function determines additional information about the procedures used to construct and report financial statements.
Safeco Company and Risco Inc are identical in size and capital structure. However, the riskiness of their assets and cash flows are somewhat different, resulting in Safeco having a WACC of 10% and Risco a WACC of 12%. Safeco is considering Project X, which has an IRR of 10.5% and is of the same risk as a typical Safeco project. Risco is considering Project Y, which has an IRR of 11.5% and is of the same risk as a typical Risco project. Now assume that the two companies merge and form a new company, Safeco/Risco Inc. Moreover, the new company's market risk is an average of the pre-merger companies' market risks, and the merger has no impact on either the cash flows or the risks of Projects X and Y. Which of the following statements is CORRECT?
A. If the firm evaluates these projects and all other projects at the new overall corporate WACC, it will probably become riskier over time. B. If evaluated using the correct post-merger WACC, Project X would have a negative NPV. C. After the merger, Safeco/Risco would have a corporate WACC of 11%. Therefore, it should reject Project X but accept Project Y. D. Safeco/Risco's WACC, as a result of the merger, would be 10%. E. After the merger, Safeco/Risco should select Project Y but reject Project X. If the firm does this, its corporate WACC will fall to 10.5%.