Litchfield Design is planning to sell its San Francisco, Chicago, and Miami stor
ID: 2807962 • Letter: L
Question
Litchfield Design is planning to sell its San Francisco, Chicago, and Miami stores. The firm expects to sell its Miami store for a cash flow of E dollars, its San Francisco store for a cash flow of E dollars, and its Chicago store for a cash flow of L dollars. The firm expects to sell its Miami store in P years, its San Francisco store in V years, and its Chicago store in V years. The cost of capital for all three stores is R. We know that L > E > 0, P > V > 0, and R > 0. The cash flows from the sales are the only cash flows associated with the various stores. Based on the information in the preceding paragraph, which one of the following assertions is true?
Two of the three stores have equal value and those two stores are more valuable than the third store or all three stores have the same value
None of the other assertions is true
The San Francisco store is the most valuable of the 3 stores
The Miami store is the most valuable of the 3 stores
The Chicago store is the most valuable of the 3 stores
3. Based on the information in the table, which one of the assertions is true?
Investment
Present value of expected cash flow
Expected cash flow
When expected cash flow is expected
Expected annual return
A
?
41,522 dollars
in 2 years
7.02 percent
B
?
103,647 dollars
in 9 years
12.42 percent
C
20,629 dollars
23,399 dollars
in 3 years
?
D
11,356 dollars
15,383 dollars
in 9 years
?
Investment B is more valuable than investment A and investment C is riskier than investment D
Investment B is more valuable than investment A and investment D is riskier than investment C
Investment A is more valuable than investment B and investment C is riskier than investment D
Investment A is more valuable than investment B and investment D is riskier than investment C
Two of the three stores have equal value and those two stores are more valuable than the third store or all three stores have the same value
None of the other assertions is true
The San Francisco store is the most valuable of the 3 stores
The Miami store is the most valuable of the 3 stores
The Chicago store is the most valuable of the 3 stores
3. Based on the information in the table, which one of the assertions is true?
Investment
Present value of expected cash flow
Expected cash flow
When expected cash flow is expected
Expected annual return
A
?
41,522 dollars
in 2 years
7.02 percent
B
?
103,647 dollars
in 9 years
12.42 percent
C
20,629 dollars
23,399 dollars
in 3 years
?
D
11,356 dollars
15,383 dollars
in 9 years
?
Investment B is more valuable than investment A and investment C is riskier than investment D
Investment B is more valuable than investment A and investment D is riskier than investment C
Investment A is more valuable than investment B and investment C is riskier than investment D
Investment A is more valuable than investment B and investment D is riskier than investment C
Explanation / Answer
The Chicago store is the most valuable of the 3 stores
Investment A is more valuable than investment B and investment C is riskier than investment D
Present value return A 36253.37 7.02% B 36138.03 12.42% C 20629.00 4.29% D 11356.00 3.43%Related Questions
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