Question
Lisa is considering investing in a fast food franchise which is forecast to earn Net Cash Flows of $70,000 per annum for the foreseeable future.
Lisa is considering investing in a fast food franchise which is forecast to earn Net Cash Flows of $70,000 per annum for the foreseeable future. The price to invest is $1 million. However, the Australian economy is forecast to rebound dramatically over the next few months which sharply reduces the risk of the franchise. Which of the following conclusions reflects an appropriate adjustment to the risk-return relationship? Select all correct answers only.
Select one or more:
a. Increase the price to $1.1 million, to increase the return to 6.4%
b. Decrease the price to $900,000, to increase the return to 6.7%
c. Leave the price at $1 million, to maintain the return at 6%
d. Decrease the price to $800,000, to increase the return to 7.5%
e. Increase the price to $1.2 million, to decrease the return to 5.8%
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