Why do firms hold marketable securities? The Cowboys Christmas Company uses a re

Question

Why do firms hold marketable securities? The Cowboys Christmas Company uses a required return of 11.3% to evaluate most projects of average risk. Suppose the company is looking at a new project that is lower-than-average-risk, and the CEO thinks the discount rate should be risk-adjusted. What effect will this have on the project's NP? Projects Even and Louisa have both been analyzed. Their expected NPV's and IRRs are given in the table below: We are told that the two projects are independant, and we are instructed to use the NPV decision rule. We are informed that our firm has a required rate of return of 10.5%. Which project(s) should be accepted? Current assets that fluctuate with seasonal or cyclical variations in a firm's business are called . Current assets' balances that remain stable no matter the seasonal or economic conditions are called . is a policy in which all of the fixed assets of a firm are financed with long- term capital, but some of the firm's permanent current assets are financed with short-term non-spontaneous sources of funds.

Explanation / Answer

26.d

as any company accumulates funds to fund its short term operations as well as to earn something out of petty cash.

27. C

it will increase NPv as the decreased discount rate will increase the PV of future returns.

28.b

as the instruction is given that project should be chosen on NPV and both the projects are giving more return than the required one. As Louisa is generating more NPV.

29.C

as temporary assets are dependent on operating cycle but permanent assets are not.

30.C

as it is high risk high profitability approach.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.