12. Cincinnati Machine Tools (CMT) accepts projects earning more than the firmâ€™s 15% cost of capital. CMT is currently considering a 10 year project that provides annual cash inflows of $10,000 and requires an initial payment of $61,450. The net present value of the project at 15% is -$9,793. What is the IRR of this project? All stated amounts are after taxes.
13. The capital asset pricing model does not use the following factor:
a. a stockâ€™s beta
b. a stockâ€™s dividend values
c. a stockâ€™s growth rate
d. A companyâ€™s corporate governance policies.
14. The U.S. Steel Company has earnings of $2 million and 500,000 shares of common stock
currently valued at $60 per share. What is the firmâ€™s earnings per share (EPS) and price/earnings (P/E) ratio?
a. $2 EPS and P/E of 15
b. $4 EPS and P/E of 60
c. $4 EPS and P/E of 15
d. $15 EPS and P/E of 4
15. The Canadian operations of the Coffee Company of Seattle was $500,000 Canadian. Assuming that the exchange rate for converting Canadian currency to U.S. currency is 80%, how would the Seattle Coffee Company, A U.S corporation, report its Canadian operations?
a. report $500,000 in earnings
b. report $400,000 in earnings
c. report $625,000 in earnings
d. not report the Canadian earnings