The following quotes iare from a recent disclosure and public announcement of an operating decision by SR & Co., a major U.S. retailer. "Last month we decided to shut down 246 stores that were getting insufficient traffic and lacked the necessary size and scale to improve their low operating income margins." Most likely, SR & Co.s management did extensive investment analyses of these store-closure decisions, including Net Present Value analyses, making the decisions in the best interest of their shareholders. Here is the 1st question. Two more to follow. 1st Qt: Given that the decision was made in the best interest of shareholders, what do you believe was the outcome of the NPV analyses undertaken by SR & Co.?

1. These stores had positive IRR.

2. These stores had negative NPVs.

3. These stores had positive NPVs.

2nd Qt: Were these businesses able to earn their required rate of return?

1. Cannot tell because the IRR is not given.

2. No, they did not. Otherwise, they would have had positive NPVs.

3. Yes, they did.

3rd Qt.: What should have happened to the stock price of SR & Co. when they announced they were shutting down these stores?

1. Most likely it went down because the announcement had to do with losing divisions.

2. Most likely it went up especially if the announcement was unanticipated.