Q1. Which of the following can be expected to create value without qualification

Question

Q1.

Which of the following can be expected to create value without qualification?

I. Selling an underperforming project for more than its present value
II. Disposing of an underperforming project that is creating less present value than expected
III. Adding debt to the firm's capital structure

Select one:

A. I only

B. I and II only

C. I and III only

D. II and III only

E. I, II, and III

F. None of the above

Q2.

Which of the following statements is true concerning EVA?

I. EVA will be positive when the firm's return on capital is higher than its cost of capital
II. Management may be tempted to inflate current EVA by sacrificing future value creation
III. EVA measures the rate of return over a specific period of time

Select one:

A. I only

B. II only

C. III only

D. I and II only

E. I and III only

F. II and III only

Explanation / Answer

Answer 1: Selling an underperforming project for more than its present value and disposing of an underperforming project that is creating less present value than expected, these steps will reduce the burden on the company and thus are expected to create value without qualification.

Hence answer is option B.

Please post other questions separately. Thanks.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

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