sunk costs should be included
net present value method
have a PI equal to zero.
is a valuable option.
The net present value of the project is approximately $1,011
the expected return is usually the same as the actual return
only the most talented analysts can determine the true value of a security.
between 4.5% and 8%
It is the return that the firm’s creditors demand on new borrowing.
it is relevant to the WACC
less than 5%
the WACC can be used as the required return for all new projects.
a petition is filed in federal court
The cost of capital should consider the flotation costs.
Goods are sold cash
There is an opportunity cost associated with not offering credit.
electric utility company
Because by maximizing the current stock value, you also maximize the company’s profit for the year.
I and II
Book values reflect the value of the asset based on generally-accepted accounting principles.
Regional Bank, APR
a decrease in the interest rate
Financial leverage increases profits and decreases losses.
Most bonds do not carry default risk.
zero-coupon, five year
paying interest payments on a semi-annual basis.