Suppose that Intel is considering building a new chip-making factory. Assuming that Intel needs to borrow money in the bond market, an increase in interest rates makes it more factory. likely that Intel will build the new True or False: If Intel has enough of its own funds to build the new factory without borrowing, an increase in interest rates would not affect Intel's decision about whether to build the factory. O True O False
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- When nominal interest rates have hit the zero lower bound, can central banks affect the interest rates? Select one: OA. Yes: since the zero lower bound applies to nominal rates, not real rates, and it is real rates that are relevant for investment decisions. OB. No: once the zero lower bound is hit, central banks can no longer employ interest rates to stimulate economic activity. OC. Yes, but the mechanism by which central banks manipulate the interest rates that matter for spending must deviate from the banks' traditional method. OD. A and C.The company is considering hedging its copper production. It thinks that prices are highly likely to rise in the near future, it should a buy itm puts b buy otm puts c sell otm calls d do nothing2. Consider the model of Moral Hazard where firms choose between investing one unit of output in a less risky or more risky project. The safer project yields with probability and zero otherwise while the risky project yields 2 with probability and zero otherwise i.e. TG = G = TB B = 2. Suppose firms finance their investment by borrowing 1 unit from a the fiinancial market at interest rate R. The financial market is risk neutral and requires an expected rate of return equal to the risk free rate which is assumed to be zero. Will there be an equilibrium with lending to firms from the financial market A. Yes B. No C. Not enough information D. None of A-C
- If we hold all other factors the same, an increase in interest rates will: a. Decrease the present value of a stream of constant payments we expect to receive. b. Increase the present value of a stream of constant payments we expect to receive. c. Decrease the interest revenue that a company will earn on its funds that it holds in its interest-bearing checking account. d. No impact on how much a company should be willing to pay for factory equipment that is expected to significantly reduce the factory electricity costs.Suppose Hungry Whale Electronics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $400,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $325,000 Year 2 $475,000 Year 3 $475,000 Year 4 $450,000 Hungry Whale Electronics's weighted average cost of capital is 9%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value (NPV)? $1,131,073 $983,542 $1,458,542 $1,433,542(1) Why is the risk-free return independent of the state of the economy? Do T-bills promise a completely risk-free return? (2) Why are High Tech’s returns expected to move with the economy whereas Collections’ are expected to move counter to the economy? Calculate the expected rate of return on each alternative and fill in the row for in the table. You should recognize that basing a decision solely on expected returns is appropriate only for risk-neutral individuals. Because the beneficiaries of the trust, like virtually everyone, are risk averse, the riskiness of each alternative is an important aspect of the decision. One possible measure of risk is the standard deviation of returns. (1) Calculate this value for each alternative, and fill in the row for σ in the table. (2) What type of risk does the standard deviation measure? (3) Draw a graph that shows roughly the shape of the probability distributions for High Tech, U.S. Rubber, and T-bills. Suppose you suddenly remembered that…
- Please provide step by step explaination as I keep getting this question wrongwhich of the following is an example of unsystematic risk? decrease income tax for all company soft tech won a new sales contract increase in inflammation rate deccrease in government bond rateTranslate into symbolic proof and provide the reason for each step: If interest rates fall, then the stock market will rise. If interest rates do not fall, then housing starts and consumer spending will fall. Now, consumer spending is not falling. So, it's true that housing starts are not falling or consumer spending is not falling; that is, it is false that housing starts and consumer spending are both falling. This means that interest rates are falling, so the stock market will rise.
- Please see attached1) What is the company's WACC? 2) Should the company take the projects? Assume that the projects have the same risk as an average project for your firm. 3) If one project is depended on the other in a way that the company can only take both projects, should it take it?I think question 3 is not answered clearly. If Project A is rejected due to negative NPV, then all positive NPVs projects should be accepted. The answer is not clear. Please correct me if I am missing something. Question 3) If the firm uses the discounted-payback rule, will it accept any negative NPV projects? Will it turn down any positive NPV projects? How do you know? Your answer is: No Due to Project A's negative NPV, it cannot cover the initial investment within its useful life. Will it turn down any positive NPV projects? It will reject projects with positive NPVs but not those with negative NPVs. If all potential cash flows are taken into account but the project still doesn't reach the designated cutoff point, the NPV can still be positive.