Question 10 of 101.0 PointsWhen the firm sets a limit on the size of the capital budget, it is faced with _______. In order to select from among the alternative projects, the firm will consider all possible combinations of positive net present value projects within the budget limit. The set of projects with the ______ will be selected. A. cash flow budget; mutually exclusive B. mutually exclusive; maximum total NPV C. capital rationing; soft rationing D. capital rationing; maximum total NPVQuestion 9 of 101.0 PointsAn analysis of the relation between sales volume and various measures of profitability is called: A. Scenario analysis. B. Simulation analysis. C. Forecasting analysis. D. Break-even analysis. E. Sensitivity analysis.Question 8 of 101.0 PointsThe possibility that more than one discount rate will make the NPV of an investment zero is called the ___________ problem. A. multiple rates of return B. issues of scale C. net present value profiling D. mutually exclusive investment decisions E. operational ambiguityQuestion 7 of 101.0 PointsAn investment project has annual cash inflows of $4,200, $5,300, $6,100, and $7,400, and a discount rate of 14 percent.What is the discounted payback period for these cash flows if the initial cost is $7,000? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) A. 1.81 years B. 3.29 years C. 2 years D. 2.54 yearsQuestion 6 of 101.0 PointsThe regular payback method has a number of disadvantages, some of which are listed below. Which of these items is NOT a disadvantage of this method? A. does not provide any indication regarding a projects liquidity B. ignores cash flows beyond the payback period C. lack of an objective, market-determined benchmark for making decisions D. does not directly account for the time value of moneyQuestion 5 of 101.0 PointsA petition for the reorganization of the Boniface Company has been filed under the Insolvency Act. The trustees estimate the firm’s liquidation value, after considering costs, is $125 million. Alternatively, the trustees, using the analysis of the Zulu Consulting firm, predict that the reorganized business will generate $19 million annual cash flows in perpetuity. The discount rate is 14 percent.Should Boniface be liquidated or reorganized? A. Liquidated, since $125 M liquidation value is more than $2.66 M current value B. I do not know the Insolvency Act, thus, I am choosing this answer C. Liquidated, since the firm is worth more dead than alive D. Reorganized, since $135.71 M alive is more than $125 M liquidation value1. Huron Manufacturing plans to pay a dividend of $5 per share. The growth rate is 7 percent and the discount rate is 12 percent. What is the present value of growth opportunities (PVGO)? A. $41.67 B. $58.33 C. No idea D. $100Question 2 of 101.0 PointsTorbay Corporation will pay a $3.04 per share dividend next year. The company pledges to increase its dividend by 3.8 percent per year indefinitely. If you require a return of 11 percent on your investment, how much will you pay for the companys stock today? (Round your answer to 2 decimal places. (e.g., 32.16)) A. $42.22 B. $3.04 C. $32.16 D. $43.83Question 3 of 101.0 PointsIf the required rate of return used in the dividend growth model is increased, then: A. The dividend amount must also increase B. the growth rate must also increase C. P zero (P0) will increase D. The supernormal model must be used to value the stock E. The current value of the stock will decreaseQuestion 4 of 101.0 PointsSandy Ridge Orchards (SRO) currently has 430,000 shares of stock outstanding that sell for $50 per share. Assuming no market imperfections or tax effects exist, what will the share price be after a 43.5 percent stock dividend? (Round your answer to 2 decimal places; e.g., 32.16) A. $50.00 B. $38.00 C. $71.75 D. $34.84
