Bob's Tractor and Party Supply has two separate divisions: party supplies, and tractor supplies and services
The party supply division has a beta of 1.2 and is financed by 25% debt. The tractor supply and service division has a beta of 0.8 and is financed by 60% debt. The cost of debt for each division is 5%. The risk free rate and market rate are 5% and 10% respectively. A project has recently become available for each division with an expected return of 10%. Which division(s) should take on the project?
A) Party Supply
B) Tractor Supply and Services
C) Both
D) Neither
B
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Should credit be granted to a customer wishing to purchase a $2,000 item that has been marked-up 50% over cost if the probability of collection is only 65%? Assume all cash flows are discounted to present value.
A) Yes; the expected profit is $150.00 B) Yes; the expected profit is $33.33 C) No; the expected loss is $33.33 D) No; the expected loss is $150.00
The five original members of the Central American Integration System did not include:
A) El Salvador. B) Honduras. C) Guatemala. D) Nicaragua. E) Venezuela.