Luxury Production Materials (LPM) generated the following information for its capital budgeting manager: Capital Structure Project Cost IRR Type of Capital Proportion D $70,000 18.0% Debt
60.0% E 65,000 15.0 Common equity 40.0 F 75,000 14.0 G 72,000 12.0 LPM's weighted average cost of capital (WACC) is 13 percent if the firm does not have to issue new common equity; if new common equity is needed, its WACC is 16 percent. If LPM expects to generate $80,000 in retained earnings this year, which project(s) should be purchased? Assume that the projects are independent and indivisible.
A. Only Project D should be purchased.
B. Projects D and E should be purchased.
C. Projects D, E, and F should be purchased.
D. All of the projects should be purchased.
E. None of the projects should be purchased.
Answer: B
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Which of the following is considered one of the most common barriers to effective listening?
A) Misinterpretation B) Passive listening C) Selective perception D) Defensive listening E) Selective listening
Jared, a regular customer at Pablo's Bookstore, placed his backpack near one of the bookshelves where he was browsing. Jared forgot to take his backpack when leaving the store. If Farah, another customer at Pablo's, found Jared's backpack in the store, ________.
A. Farah would have the right to hold the backpack for Jared B. the bookstore would acquire possession and ownership of the backpack C. the bookstore would have the right to hold the backpack for Jared D. Farah would acquire possession and ownership of the backpack
Managers charged with implementing and executing strategy need to be deeply involved in the budgeting and resource allocation process because of all the following reasons EXCEPT
A. a change in strategy nearly always calls for budget reallocations and resource shifting. B. without major budget reallocations there is little chance that desired core competencies and organizational capabilities will emerge. C. resource allocation involves screening of requests for people, facilities, and equipment, and approving them whether they contribute to the strategy execution effort or not. D. too little funding deprives organizational units of the necessary resources to execute their piece of the strategic plan while too much funding wastes organizational resources and reduces financial performance. E. lean, carefully managed budgets protect the company's financial condition and eliminate the wasteful use of cash.
Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $53,000 for the past year. Kitchen division sales for the year were $1,040,000, and its variable costs were $775,000. The fixed costs of the division were $318,000. If the kitchen division is dropped, 60% of the fixed costs allocated to it could be eliminated. The impact on Valdez's operating income from eliminating this business segment would be:
A. $274,200 decrease B. $74,200 decrease C. $265,000 decrease D. $74,200 increase E. $265,000 increase