MIDLAND QUESTIONS updated

The calculation of a hurdle rate when looking capital expenditures involves looking at what financial metrics to determine the firm's hurdle rate?  Upon determining the hurdle rate, how is a potential CAPEX assessed against the hurdle rate to insure ROI meets or exceeds the firms calculated hurdle?  Would appreciate a verbal explanation and a calculated formulaic example if possible please! Thank you.

Questions   How would you assess the evolution of the capital structure of LGI? Reflecting on your work in Project 1, would you consider the risk exposure under control? If not, what are your recommendations?   [insert your answer here]     What kind of information do you find valuable in CAPM to guide you in assessing the risk of LGI compared to other firms and the market in general?   [insert your answer here]     3. Identify and differentiate the stakeholders of LGI and explain how each one should perceive and weigh the risk and/or return of the firm.   [insert your answer here]     Would you consider the investment made in Project 4 optimally financed considering the proportion of debt that is bearable by LGI? How did the current WACC in Project 5 depart from the state of the firm in Project 1?   [insert your answer here]       1.If you had to advise a potential investor interested in having a minority stake in LGI, what kind of information would you provide to help the…

22. A qualitative factor (as opposed to a quantitative factor) that managment should consider when evaluating alternative capital investments would be Group of answer choices estimated costs The corporate strategy projected net cash flows economic returns and IRR

Multiple Choice Questions 1. The following statements are correct for the Economic Value Added (EVA), except, A. The most conventional way to determine the value of the asset is through its economic value added. B. Economic value Added (EVA) is a convenient metric in evaluating investment as it quickly measures the ability of the firm to support its cost of capital using its earnings C. EVA is the excess of the company’s equity after deducting the cost of capital.  D. The general concept here is that higher EVA is better for the firm 2. Ernesto, Inc. has projected average earnings every year of P 100 million. Debt to Equity Ratio is 3:1. After tax cost of debt is 5% while cost of equity is 10%. The Board of directors of the company decided to sell the company for P 1 Billion. Compute for the Economic Value Added. (EVA). A. 5 Million B. P 50 Million C. P 0 D. P 25 Million 3. SPRO Corp is planning to expand and new projects is expected to have an EVA of P200,000. The annual coast of…

What are two crucial presuppositions we make when we choose to use the present cost of capital of a firm to evaluate the profitability of projects in which we invest? Be thorough.

Based on the assumption efficient capital market is characterized by rationality and risk aversion, how does a company’s management select projects to maximize their owners (shareholders) wealth?   please cite sources

Which of the following statement is INCORRECT?   Question 15 options:   1)  The finance manager manages the short-term balance sheet items of the company, such as current assets and current liabilities.   2)  The finance manager uses investment evaluation techniques to decide whether to purchase fixed assets.   3)  The finance manager seeks to maximise the firm’s wealth when deciding on the choice of capital sources such as debts and equity.   4)  The right-hand side of the balance sheet refers to the company’s investment decisions to buy fixed assets to generate returns.

Based on the CAPM, how would one adjust the corporation’soverall cost of capital to establish the required return for mostprojects in a low-risk division and in a high-risk division?

If managers of a company have inside information about the company’s future performances and such inside information is unknown to outsiders, then the company’s managers are most likely to use _____ to finance its project investment Group of answer choices a. the company’s retained earnings b. debt borrowing from banks c. share issuance to new investors d. there is no difference among the above three funding options

Which one of the following statements about book value and market value is correct? Group of answer choices a. Both book value and market value are forward-looking. b. Both book value and market value account for all forms of assets and liabilities of a firm. c. The market value of equity should not differ much from the book value of equity. d. Decision-making should be based on market value instead of book value.

What can be added to this or what comment can made?   The weighted average cost of capital (WACC) is a useful measure for businesses deciding whether or not to invest. WACC is a financial model that helps companies understand how investment decisions will effect their finances. Companies and investors will be able to determine whether or not to proceed with investment initiatives based on the information offered by applying WACC calculations, such as a company's share value. WACC will be used by financial analysts to determine critical investing parameters such as the net present value of a firm and the potential for future cash flows. WACC is used to complete these computations, and the result is divided by the number of shareholders' equity.

Which of the following is a working capital management issue? O A. The choice of which long-term assets to purchase to meet the firm's business goals. O B. The appropriate amount of cash to hold. C. None of the above is a working capital management issue. O D. The proper mix of stocks and bonds to issue for financing assets.

Which of the following statements is CORRECT?   a. WACC calculations should be based on the before-tax costs of all the individual capital components.   b. Flotation costs associated with issuing new common stock normally reduce the WACC.   c. An increase in the risk-free rate will normally lower the marginal costs of both debt and equity financing.   d. A change in a company's target capital structure cannot affect its WACC.   e. If a company's tax rate increases, then, all else equal, its weighted average cost of capital will decline.

What comment can be made on this or what can be added? The Weighted Average Cost of Capital (WACC) is a financial analytical tool that is essentially a calculation utilizing a company's market value of equity, debt, and tax rate. This allows both the company and investors an estimated net value of the company and can give indications of the value of the company moving forward. The WACC is especially important for a company to understand because the WACC is a good indication of the success or failure of a company's current investment strategy and if favorable, can assist a company when it comes to purchases of sales or other acquisitions