Incorporating flotation costs into the analysis of a project will:
A. cause the project to be improperly evaluated.
B. increase the net present value of the project.
C. increase the project's rate of return.
D. increase the initial cash outflow of the project.
E. have no effect on the present value of the project.
Which one of the following statements concerning net working capital is correct?
A. Net working capital increases when inventory is purchased with cash.
B. Net working capital must be a positive value.
C. Total assets must increase if net working capital increases.
D. A decrease in the cash balance also decreases net working capital.
E. Net working capital is the amount of cash a firm currently has available for spending.
A news flash just appeared that caused about a dozen stocks to suddenly drop in value
by about 20 percent. What type of risk does this news flash represent?
In an effort to capture the large jet market, Hiro Airplanes invested $12.68 billion
developing its B490, which is capable of carrying 800 passengers. The plane has a list
price of $275 million. In discussing the plane, Hiro Airplanes stated that the company
would break-even when 246 B490s were sold. Assume the break-even sales figure
given is the cash flow break-even. Suppose the sales of the B490 last for only 9 years.
How many airplanes must Hiro Airplanes sell per year to provide its shareholders a 19
percent rate of return on this investment?