Last year godinho corp had 250 million of sales and

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7.  Last year Godinho Corp. had $250 million of sales, and it had $75 million of fixed assets that were being  operated at 80% of capacity. In millions, how large could sales have been if the company had operated at full  capacity?  A) $312.5  B) $328.1  C) $344.5  D) $361.8  E) $379.8  8.  How do mutually exclusive and independent investment projects differ?  Projects are independent if the cash flows of one are not affected by the acceptance of the other.  Conversely, two projects are mutually exclusive if acceptance of one impacts adversely the cash flows of  the other; for example, a forklift truck versus a conveyor system to move materials, or a bridge versus a  ferry boat.  9.  Which of the following are NOT ways risk management can be used to increase the value of a firm?  A) Risk management can increase debt capacity.  B) Risk management can help a firm maintain its optimal capital budget.  C) Risk management can reduce the expected costs of financial distress  D) Risk management can help firms minimize taxes.  E) Risk management can allow managers to defer receipt of their bonuses and thus postpone tax  payments.  10.  Which of the following is NOT normally regarded as being a good reason to establish an ESOP?  11.  What are some of the disadvantages of the payback rule in capital budgeting?
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  Some of the disadvantages of the payback rule in capital budgeting include that it: (1) Ignores the time  value of money (2) Requires an arbitrary cutoff point (3) Ignores cash flows beyond the cutoff date and  (4) Is biased against long-term projects.  12.  How is a stock’s beta computed?  The beta of a stock is calculated by looking at its monthly returns, usually for the past five years. Those  are compared to the returns of a major index, usually the Standard & Poor's 500, using it as a "proxy" of  the market. Then, using a statistical regression analysis, the beta number is determined.  13.  If the spot rate of the Israeli shekel is 5.51 shekels per dollar and the 180-day forward rate is 5.97 shekels per  dollar, then the forward rate for the Israeli shekel is selling at a ________________ to the spot rate.  14.  Would you expect that a technology firm or a utility firm would have a higher Price/Earnings ratio?  I would expect that a utility firm has a higher Price/Earnings ratio. 
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  • Spring '11
  • Abner
  • Debt, forward contracts, optimal capital budget, higher Price/Earnings ratio

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