Which of the following companies will probably have the highest decline in profit if the economy goes into recession? A company with a DOL = 5.7 O A company with a DOL = 2.5 A compnay with a DOL = 5.8 O A company with a DOL = 5.5
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- Suppose a company increases the price of its product and demand hardly declines.which of the following will increase? A) profit margin B) return - on - equity C) taxes D) all the above32. Choose the characteristics of the recession phase. (Check all that apply) Unemployment begins to rise Businesses lower production of goods and services Profits are high GDP growth slows for two or more quarters The economy slows downYour business plan for your proposed start-up firm envisions first-year revenues of $180,000, fixed costs of $60,000, and variable costs equal to one-third of revenue. a. What are expected profits based on these expectations? (Round your answer to nearest whole number.) Expected profit b. What is the degree of operating leverage based on the estimate of fixed costs and expected profits? (Round your answer to 2 decimal places.) Degree of operating leverage c. If sales are 10% below expectation, what will be the percentage decrease in profits? (Round your answer to nearest whole number.) Decrease in profits %
- •Question 1 Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Allos Inc. Returns (RA) Orangus Inc.Returns (Rg) snäur Depression -20% Recession 20% %10% Normal -12% %6 Required: 1. For each company calculate: i. the expected returns ii. the Variance 2. Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, jii. the Standard deviation what will be your portfolio returns? 3. Calculate the Standard deviation of the portfolio.Consider an economy with two types of companies, S and I. The profits of companies S always move together, but the profits of companies I move independently of each other. For both firms, there is a 70% probability that the firm's return is 30%, and a 30% probability that the return is -30%. The standard deviation of an individual company's return is closest to the value: Choose one: A.23.0% B.5.25% C.15.0% D.10.0% Only typed answer1. A company forecast to have negative economic value added (EVA) forever, will be trading at EV/Capital ratio smaller than one. (All else equal.) True or False
- If the probability of a recession is 0.3, normal growth is 0.4 and a boom is 0.3, and the payoff in the event of a recession is $100, normal growth is $300 and boom is $500, what is the expected payoff? a. $300 b. $400 c. $200 d. $500Question 3 Esellance, a sale training company manager, believes that the economic state for the next year will be strong, normal, or weak and that the company’s returns will have the probability distribution presented below: State of economy. Probability of the state of economy. Rate of return Strong. 0,50 45% Normal 0,40 15% Weak 0,10 5% What is the coefficient of variation of the estimated returns? 1. 0,560 2. 0,584 3. 0,600 4. 0,620Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Depression -20% 5% Recession 10% 20% Normal 30% -12% Boom 50% 9% •Required: 1.For each company calculate: i.the expected returns ii.the Variance iii.the Standard deviation 2.For each company calculate and explain: i.The covariance ii.The correlation 3.Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.
- A corporation that is a single product firm is predicting that a price increase next year will cause unit sales to decrease. What effect would this price increase have on the following items for next year? A) B) C) D) Contribution Margin Ratio Increase Decrease Increase Decrease Multiple Choice Break-even Point Decrease Decrease No effect No effectIn the table below x denotes the X-Tract Company’s projected annual profit (in $1,000). The table also shows the probability of earning that profit. The negative value indicates a loss. x f(x) x = profit -100 0.01 f(x) = probability -200 0.04 0 100 0.26 200 0.54 300 0.05 400 0.02 7 What is the probability that X-Trac will be profitable? That is, f(x > 0) = _________. a 0.87 b 0.83 c 0.79 d 0.75Market Value Added. Suppose the broad stock market falls 20% in a year and Home Depot's stock price falls by 10%. (LO4-1) 2. a. Will the company's market value added rise or fall? b. Should this change affect our assessment of the performance of Home Depot's managers? c. Would you feel differently about Home Depot's managers if the stock market were unchanged and Home Depot's stock fell by 10%?