Business, 07.03.2020 04:52 hannahbannana98
Careco Company and Audaco Inc are identical in size and capital structure. However, the riskiness of their assets and cash flows are somewhat different, resulting in Careco having a WACC of 10% and Audaco a WACC of 12%. Careco is considering Project X, which has an IRR of 10.5% and is of the same risk as a typical Careco project. Audaco is considering Project Y, which has an IRR of 11.5% and is of the same risk as a typical Audaco project. Now assume that the two companies merge and form a new company, Careco/Audaco Inc. Moreover, the new company's market risk is an average of the pre-merger companies' market risks, and the merger has no impact on either the cash flows or the risks of Projects X and Y. Which ONE of the following statements is CORRECT?a. If evaluated using the correct post-merger WACC, Project X would have a negative NPV. b. After the merger, Careco/Audaco would have a corporate WACC of 11%. Therefore, it should reject Project X but accept Project Y. c. Careco/Audaco's WACC, as a result of the merger, would be 10%.d. After the merger, Careco/Audaco should select Project Y but reject Project X. If the firm does this, its corporate WACC will fall to 10.5%.e. If the firm evaluates these projects and all other projects at the new overall corporate WACC, it will probably become riskier over time.
Answers: 2
Business, 22.06.2019 13:40, ilovecatsomuchlolol
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Answers: 3
Business, 22.06.2019 14:40, ZoomZoom44
You are purchasing a bond that currently sold for $985.63. it has the time-to-maturity of 10 years and a coupon rate of 6%, paid semi-annually. the bond can be called for $1,020 in 3 years. what is the yield to maturity of this bond?
Answers: 2
Business, 22.06.2019 21:30, dondre54
The year-end financial statements of calloway company contained the following elements and corresponding amounts: assets = $34,000; liabilities = ? ; common stock = $6,400; revenue = $13,800; dividends = $1,450; beginning retained earnings = $4,450; ending retained earnings = $8,400. based on this information, the amount of expenses on calloway's income statement was
Answers: 1
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