Question
Please help with both! 1. The common stock of Sammy's Pizza has an equity beta of 1.06. The current return on Treasury bill is 4.3%
Please help with both!
1. The common stock of Sammy's Pizza has an equity beta of 1.06. The current return on Treasury bill is 4.3% and the Dow Jones Industrial is returning 8.1%. What is Sammy Pizza's cost of internal equity? Enter your answer as a decimal with a leading zero and 4 decimal places of precision.
33. Which of the following statements is CORRECT?
a. | If an asset is sold for less than its book value at the end of a projects life, it will generate a loss for the firm, and the associated project's terminal cash flow will always be negative. | |
b. | Only incremental cash flows are relevant in project analysis, the proper incremental cash flows are the reported accounting profits, and thus reported accounting income should be used as the basis for investor and managerial decisions. | |
c. | It is unrealistic to believe that any investment in working capital required at the start of a project can be recovered at the projects completion. Thus, cash flows associated with working capital should be included only at the start of a projects life (Year 0). | |
d. | Discounted Cash Flow techniques (such as the capital budgeting techniques studied in this chapter) were originally developed to value passive investments. However, capital budgeting projects are not passive investments--managers can often take actions after the investment has been made that alter the cash flow stream. Opportunities for such actions are called real options. | |
e. | None of the other responses are correct. |
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