1. What does P/E Ratio of a 10 indicate? a. It would take 10 years for an investor to recover his or her initial investment b. The firm will pay a dividend of $10 per share. c. The value of the stock will be 10 times the initial investment at the time of maturity. d. An investor would receive 10 percent of the total earnings of the firm, at the time of liquidation
2. Which of the following statements is most CORRECT regarding sunk costs? A) An example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has been depleted B) Sunk costs must be considered if the IRR method is used but if not the firm relies on the NPV method C) A good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward with the project D) A good example of a sunk cost is a situation where a bank opens a new office, and that new office leads to a decline in deposits of the banks other offices.