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Question 1 Not yet answered Marked out of 1.00 P Flag question Question 2 Not yet answered Marked out of 1.00 P Flag question Forecasting risk is a concern for nancial managers because Select one: C\" a. the rm may not be able to correctly project its future nancing costs. C\" b. overly optimistic estimation of future cash ows may lead to incorrect capital budgeting decisions. C\" c. forecasts by industry analysts may not agree with the rm's forecasts of its future revenues. C\" d. strategic options cannot be included in the capital budgeting decision criteria. C\" e. the investment decision process should aim to match projected cash ows with actual cash flows. Norister Inc. is considering introducing a new product line. This will require the purchase of new xed assets of $2,4 million. The company estimates that demand for the new product will be approximately 15,000 units per year, with a price per unit of $1 00. The variable cost of producing each unit of the product is $35, and xed costs per year will be $100,000. Demand for the product will remain constant for six years, after which both demand and production will cease, and the associated xed assets will have no salvage value. Depreciation on the xed assets will be straight-line to zero. The company's marginal tax rate is 35%, and the required return on the project is 13%. How will the after-tax operating cash ow (ATOCF) change if the number of units sold is 10% less than the projected demand of15,000 units? Select one: C\" a. ATOCF will increase by 10%. C\" b. ATOCF will decrease by 10%. C\Question 3 Not yet answered Marked out of 1.00 '7 Flag question Norister Inc. is considering introducing a new product line. This will require the purchase of new xed assets of $2.4 million. The company estimates that demand for the new product will be approximately 15,000 units per year, with a price per unit of $100. The variable cost of producing each unit of the product is $35, and xed costs per year will be $100,000, Demand for the product will remain constant for six years, after which both demand and production will cease, and the associated xed assets will have no salvage value. Depreciation on the xed assets will be straight-line to zero. The company's marginal tax rate is 35%, and the required return on the project is 13%. Due to forecasting risk, the company estimates that price per unit, variable cost, xed costs, and quantity sold could vary by $1096, 115%, 15%, and i10%, respectively. What is the project's net present value in the worst case scenario? Select one: 5 a. -$656,606 -is b. -$543,413 is c. -$368,020 0; d. -$103,677 6 e. $43,502 Question 4 Not yet answered Marked out of 1.00 V Flag question Question 5 Not yet answered Marked out of 1.00 '7 Flag question To avoid prejudgment of risk during a simulation analysis, the discount rate used to calculate net present value should be the Select one: CT a. cost of long-term debt. CT b. cost of new equity. CT c. weighted cost of capital. CT d. risk-free rate. CT e. required rate of return on projects of similar risk. Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and xed costs are $200,000 per year. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. Ignoring taxes, what is the accounting break-even quantity? Select one: CT a. 800 CT b. 880 CT c. 8,000 (T CI. 8,800 0 e. 88,000 Question 6 Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and xed costs are $200,000 per year. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. What is the cash '7 Flag question brea k-even quantity? Not yet answered Marked out of 1.00 Select one: C a. 800 A b. 880 A c, 8,000 A d. 8,800 A e. 88,000 Question 7 Not yet answered Marked out of 1.00 '7 Flag question Question 8 Not yet answered Marked out of 1.00 '7 Flag question Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and xed costs are $200,000 per year. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. Ignoring taxes, what is the nancial break-even quantity? Select one: C\"; a. 8,800 (i b. 10,295 C\" c. 12,574 (T; d. 15,275 C\"; e. 20,000 Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and xed costs are $200,000 per year. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. What is the degree of operating leverage at the expected quantity sold of 20,000 units? Select one: C\" a. 1.02 C\"; 13.1.04 ;C\"_;c.1.08 {\"d.1.12 (701.14 Question 9 which of the following is not a managerial option in the capital budgeting process? Not yet answered Marked out of'l.00 seleCt one: '7 Flag question C a. option to abandon C b. option to wait C c. option to expand C d. strategic option C e. none ofthe above Question 10 Which of the following break-even analyses yields a negative net present value? Not yet answered I. accounting break-even Mark\" M \"1'00 II. cash break-even '7 \"3g \"95\"\" III. nancial break-even Flag this question for future reference 5E ECI 0 IE. C a. | only C D. II only C c. III only C d. | and II only C e. I, II, and Ill We have the following information on the shares prices of Pa pa Smirph Corporation over the last ve years. Calculate the total dollar return and percentage return on each share. Year Papa Smirph share price Annual dividend per share 1 $20 $1.50 2 $25 $1.50 3 $22 $1.50 4 $30 $1.60 5 $32 $1.60 Select one: C a. $12; 60% A b. $19.7; 61.6% A c. $19.7; 98.5% 0 d. $12; 38.5% C? e. $3.94: 15.3% We know that during the last 10 years, the average historical return on a market index is 12%. We also know that the average ination rate and average risk-free rate over the last 10 years are 2% and 5%, respectively. What is the real risk premium using the exact Fisher equation? Select one: A a. 2.94% A b. 6.86% A c. 7.00% 0 d. 9.80% r) e. 10.00% Given the following share price history, calculate the standard deviation of the returns on this stock. Year Share price 1 $35 2 $30 3 $39 4 $42 5 $45 Select one: A a. 0.18% A b. 5.89% A c. 18.08% A d. 3.27% Ae.1.81% Which of the following lessons can be learned from studying the history of individual asset returns in the capital market? Select one: A a. Return and risk expectations can and will materialize over time if we wait long enough. A b. There are rewards, in terms of higher risk premiums, for holding risky assets. A c. Arithmetic and geometric average returns would be the same in an efcient nancial market. A cl. Unsystematic risk is the risk that is important to the average investor. A e. Excess returns on mutual funds cannot beat excess returns on index funds. What is the geometric average return of a stock with the following share price history? Year Share price 1 $35 2 $30 3 $39 4 $42 5 $45 Select one: A a. 7.95% A b. 7.64% C' c. 7.14% A d. 6.84% A e. 6.48% The statement "all information, including 'insider information,' are already priced in the market" describes a market. Select one: A a. weak-form efcient A b. strong-form efcient A c. semi-strong-form efcient A d. stock A e. bond The average historical annual return on a stock is 7.16%, with a standard deviation of 44.35%. What is the 97.5% annual value-at-risk (VaR) on a $1 million investment in this stock? Select one: A a. $371,900 IA b. -$443,000 A c. -$815,400 A d. -$975,000 A e. $1,000,000 Research into the performance of mutual funds showed that fund managers have not been able to beat the returns on index funds. This is lends credence to Select one: C\"; a. the argument for market diversication. C\"; b. the argument for centralized regulation ofthe nancial market. C\" c. semi-strong form market efciency. C\" d. strong form market efciency. C\"; e. the non-existence of market anomalies