Choose all that are appropriate 1. 2. 3. A firm whose ROE is 5% and cost of capital is 10% is creating value. Positive NPV projects will have rates of return greater than the cost of capital. If a division of a firm has lower risks than other divisions, the firm has a risk of underinvesting in that division 4. A company with sustainable returns to capital of 15% and a cost of capital of 12% will maximize its value by offering dividends at 3% of par value. 5. Management should prioritize payment of dividends because that would create value for shareholders.

Choose all that are appropriate 1. 2. 3. A firm whose ROE is 5% and cost of capital is 10% is creating value. Positive NPV projects will have rates of return greater than the cost of capital. If a division of a firm has lower risks than other divisions, the firm has a risk of underinvesting in that division 4. A company with sustainable returns to capital of 15% and a cost of capital of 12% will maximize its value by offering dividends at 3% of par value. 5. Management should prioritize payment of dividends because that would create value for shareholders.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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