Question

13. Pierce Construction Inc. had a debt ratio of 04. What is the com ratio? A, B:, C, D, E. 90% 62.5% 6096 67% 45% 14. You are considering the following two projects: Year 500 34,500 4,000 which project has a higher NPV when the required return is 20%? A. B. C. D. E. Project A Project B Both Projects have the same NPV The NPV cannot be calculated from the information provided for both Projects The NPV can be calculated for one Project but not the other. 15. The original Barbie doll was introduced in 1959 and sold for approximately $3.00. In 2003, a mint-condition doll in its original box would be listed on Ebay at approximately $568.84. What average annual rate of return would the seller realize if she had been the original purchaser of this 'investment'? A. 20.66% В. 19.74% C. 18.51% D. 12.66% E. 14.95%

Answer 1

13.

debt ratio=0.4

debt/assets=0.4

it means debt has 40% in assets which means equity will be=1-0.4=0.6

debt to equity=0.4/0.6=67%

14.

NPV of A=-3500+2000/(1+20%)^1+3500/(1+20%)^2+4500/(1+20%)^3=3201.39

NPV of B=-5500+3200/(1+20%)^1+4000/(1+20%)^2+5000/(1+20%)^3=2837.96

so project A has a higher NPV

so answer is A. project A

15.

the average annual rate

=(568.84/3)^(1/44)-1

=12.66%

the above will be the answer..