Which investment criterion produces multiple rates of return when the cash flow
ID: 2787519 • Letter: W
Question
Which investment criterion produces multiple rates of return when the cash flow is unconventional? a. Average Accounting Rate of Return b. Net Present Value d. Internal Rate of Return Profitability Index 7. , undertaking one of them does not preclude our By definition, when two projects are taking on the other. a. identical similar c. independent d mutually excl 8· The components of required return on a stock are a. C. The stock valuation model that determines the current stock price as the next dividend divided by current yield and future yield capital gain and capital yield dividend yield and current gain b. d. Dividend yield and capital gain Zero growth model The coupon interest rate. 9. the (discount rate less the dividend growth rate) is called the: a) c) Capital Asset Pricing Model b) Gordon (Dividend) growth model. d Earnings capitalization model Which of the following would not be listed on the face ofa bond ? a. c. its current market price. d. coupon payment. 10. b. The maturity date.Explanation / Answer
Answer 6) d)Internal Rate of Return
Explanation :-
•Non-conventional”
–Cash flows change sign more than once
–Most common:
•Initial cost (negative CF)
•A stream of positive CFs
•Negative cash flow to close project.
•For example, nuclear power plant or strip mine.
–More than one IRR ….
Answer 7) c) Independent
•Independent
–The cash flows of one project are unaffected by the acceptance of the other.
•Mutually Exclusive
–The acceptance of one project precludes accepting the other.
Answer 8) a) Dividend Yield and Capital gain
The two components are dividend yield which measures the annual percentage income return on a stock and the capital gains yield which is the percentage of price appreciation or depreciation.
Answer 9) b) Gordon (Dividend ) Growth Model
The Dividend Growth Model is a method of valuing a company's stock price based on the theory that its stock is worth sum of all its future dividend payments ,discounted back to their present values.It is used to value stocks based on the net present value of the future dividends.
Answer 10)d) Coupon Payment
The face value of a stock or bond does not denote the actual market value
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