CORRECT TEXTThe following data are available for an investment centre for the latest period. Where appropriate the data have been adjusted to reflect economic values.What cost of capital has been used to calculate the EVA?Give your answer to the nearest percentage.
Answer(s): A
A company has recently developed a new lawnmower with an estimated market life of 5 years. Production and sale of the lawnmower will require investment in new production equipment costing $750,000. It is expected that this equipment could be sold back to the original vendor for $50,000 at the end of five years.Purchase of the equipment would be financed by a 5 year fixed rate bank loan at an interest rate of 6%.A manager already employed by the company would be moved from their current position to manage production of the new lawnmower. Their original position would be filled by a new recruit on a fixed annual salary of $35,000.Which of the following statements is NOT correct?
Answer(s): C
An electronics company sells a range of tablet computers. Tablet computers come complete with an operating system that is regarded as the market leader. The company aims to launch a new version of its hardware every eighteen months and a major update to its software every three years. The latest version of the tablet computer is always sold at a higher price, but the older version that has been replaced is then sold for a time at a discounted price.Which pricing model does this company appear to be using?
Answer(s): D
Firefighters risk serious and potentially fatal accidents whenever they attend an incident.Which of the following statements is correct?
The directors of a company wish to evaluate two mutually exclusive capital investment projects. Both projects have conventional cash flows: an initial outflow followed by a series of annual cash inflows.The directors are aware of the following three investment appraisal methods: internal rate of return (IRR), net present value (NPV) and accounting rate of return (ARR).The directors have asked for your advice about which method should be used to evaluate these two projects.Which of the following is valid advice to give to the directors?
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