The following table summarizes return on equity (ROE) and beta for each of three major automotive firms:

Chrysler: ROE = 14.00%; Beta = 1.20

Ford Motor: ROE = 16.00%; Beta = 1.10

General Motors: ROE = 11.50%; Beta = 1.15

The risk-free rate of return is 5.50% and the market rate of return in 10.50%. Based on the ROE-to-Ke return differential, which firm created value?

Select one:

A. I and II onlyB. I and III onlyC. II and III onlyD. I, II, and III

MSF Corporation has a project with an abandonment option. The forecasted cash flows of the project without the abandonment option is as follows:

CF0

CF1

CF2

CF3

CF4

Best -

26m

11m

10m

8m

8m

Likely -

26m

10m

9m

8m

8m

Worst -

26m

7m

6m

6m

5m

The forecasted cash flows of the project with the abandonment option is as follows:

CF0

CF1

CF2

CF3

CF4

Best -

26m

11m

10m

8m

8m

Likely -

26m

10m

9m

8m

8m

Worst -

26m

24m

0

0

0

The probability of realizing the best case scenario is 20%, the probability of realizing the likely scenario is 60%, and the probability of realizing the worst case scenario is 20%. MSF Corporation has a cost of capital of 12%. What is the expected net present value (P-NPV) of the project without the abandonment option?

Select one:

A. -.8817mB. -.5144mC. -.4603mD. -.3304m

You have been hired as a capital budgeting analyst by Advent Sports, a sporting goods firm that manufactures athletic shoes. The firm believes it can generate another $10 million per year over the next 10 years by investing $10 million in a new distribution system (which will be depreciated over the system's 10-year life to a salvage value of zero). The firm will also need an initial increase of $1 million in net working capital to take on this project. The company expects its variable costs associated with these sales to be 40% of revenues, and additional advertising costs are anticipated to be $1 million per year. The firm is in the 40% tax bracket and has a hurdle rate of 8%. What is the free cash flow to the firm expected to be for the project's second year? Select one: A. $2.4 million B. $3.4 million C. $4.6 million D. None of the aboe

Which of the following is true concerning free cash flows to the firm (FCFF)?

1. FCFF represents operating cash flows less changes in net working capital and capital spending.
2. Financing expenditures, including interest and dividend payments, are deducted to arrive at FCFF.
3. The calculation of FCFF is considered an important aspect of project analysis.

Select one:

A. I onlyB. I and II onlyC. I and III onlyD. I, II, and III