Q&A Hero

Q: The cash conversion cycle (CCC) combines three factors: The inventory conversion period, the average collection period, and the payables deferral period, and its purpose is to show how long a firm must finance its working capital. Other things held constant, the shorter the CCC, the more effective the firm's working capital management. a. True b. False

Q: A disadvantage of distributed data processing is a. the increased time between job request and job completion. b. the potential for hardware and software incompatibility among users. c. the disruption caused when the mainframe goes down. d. that users are not likely to be involved.

Q: The longer its customers normally hold inventory, the longer the credit period supplier firms normally offer. Still, suppliers have some flexibility in the credit terms they offer. If a supplier lengthens the credit period offered, this will shorten the customer's cash conversion cycle but lengthen the supplier firm's own CCC. a. True b. False

Q: Which of the following is not true?a. Management may outsource their organizations' IT functions, but they cannot outsource their management responsibilities for internal control.b. Section 404 requires the explicit testing of outsourced controls.c. The SSAE 16 report, which is prepared by the outsourcer's auditor, attests to the adequacy of the vendor's internal controls.d. Auditors issue two types of SSAE 16 reports: Type I report and Type II report.

Q: Other things held constant, if a firm "stretches" (i.e., delays paying) its accounts payable, this will lengthen its cash conversion cycle (CCC). a. True b. False

Q: Which of the following is not true?a. When management outsources their organization's IT functions, they also outsource responsibility for internal control.b. Once a client firm has outsourced specific IT assets, its performance becomes linked to the vendor's performance.c. IT outsourcing may affect incongruence between a firm's IT strategic planning and its business planning functions.d. The financial justification for IT outsourcing depends upon the vendor achieving economies of scale.

Q: If a firm takes actions that reduce its days sales outstanding (DSO), then, other things held constant, this will lengthen its cash conversion cycle (CCC). a. True b. False

Q: Which of the following is not true? Large-scale IT outsourcing involves transferring specific assets to a vendor Specific assets, while valuable to the client, are of little value to the vendor Once an organization outsources its specific assets, it may not be able to return to its pre-outsource state. Specific assets are of value to vendors because, once acquired, vendors can achieve economies of scale by employing them with other clients

Q: Albrecht Inc. is a no-growth firm whose sales fluctuate seasonally, causing total assets to vary from $320,000 to $410,000, but fixed assets remain constant at $260,000. If the firm follows a maturity matching (or moderate) working capital financing policy, what is the most likely total of long-term debt plus equity capital?a. $260,642b. $274,360c. $288,800d. $304,000e. $320,000

Q: Which of the following is true? a. Core competencytheory argues that an organization should outsource specific core assets. b. Core competencytheory argues that an organization should focus exclusively on its core business competencies c. Core competencytheory argues that an organization should not outsource specific commodity assets. d. Core competency theory argues that an organization should retain certain specific noncore assets in-house.

Q: Which of the following is NOT an example of a specific assets? a. application maintenance b. data warehousing c. highly skilled employees d. server maintenance

Q: Which of the following is NOT a situation that might lead a firm to increase its holdings of short-term marketable securities? a. The firm is going from its peak sales season to its slack season, so its receivables and inventories will experience a seasonal decline. b. The firm is going from its slack season to its peak sales season, so its receivables and inventories will experience seasonal increases. c. The firm has just sold long-term securities and has not yet invested the proceeds in operating assets. d. The firm just won a product liability suit one of its customers had brought against it. e. The firm must make a known future payment, such as paying for a new plant that is under construction.

Q: Which of the following statements is CORRECT? a. Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing. b. If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt. c. Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased. d. If a company follows a policy of "matching maturities," this means that it matches its use of short-term debt with its use of long-term debt. e. Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the current ratio automatically indicates that net working capital has increased.

Q: The following are examples of commodity assets except a. network management b. systems operations c. systems development d. server maintenance

Q: Summary balance sheet data for Greener Gardens Co. is shown below (in thousands of dollars). The company is in a highly seasonal business, and the data show its assets and liabilities at peak and off-peak seasons: Peak Off-PeakCash $ 50 $ 30Marketable securities 0 20Accounts receivable 40 20Inventories 100 50Net fixed assets 500 500 Total assets $690 $620 Payables and accruals $ 30 $ 10Short-term bank debt 50 0Long-term debt 300 300Common equity 310 310 Total claims $690 $620From this data we may conclude thata. Greener Gardens' current asset financing policy is relatively aggressive; that is, the company finances some of its permanent assets with short-term discretionary debt.b. Greener Gardens follows a relatively conservative approach to current asset financing; that is, some of its short-term needs are met by permanent capital.c. Without income statement data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.d. Without cash flow data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.e. Greener Gardens' current asset financing policy calls for exactly matching asset and liability maturities.

Q: All of the following tests of controls will provide evidence about the adequacy of the disaster recovery plan except a. inspection of the second site backup b. analysis of the fire detection system at the primary site c. review of the critical applications list d. composition of the disaster recovery team

Q: All of the following tests of controls will provide evidence about the physical security of the computer center except a. review of fire marshal records b. review of the test of the backup power supply c. verification of the second site backup location d. observation of procedures surrounding visitor access to the computer center

Q: Firms generally choose to finance temporary current operating assets with short-term debt because a. short-term interest rates have traditionally been more stable than long-term interest rates. b. a firm that borrows heavily on a long-term basis is more apt to be unable to repay the debt than a firm that borrows short term. c. the yield curve is normally downward sloping. d. short-term debt has a higher cost than equity capital. e. matching the maturities of assets and liabilities reduces risk under some circumstances, and also because short-term debt is often less expensive than long-term capital.

Q: The relative profitability of a firm that employs an aggressive current asset financing policy will improve if the yield curve changes from upward sloping to downward sloping. a. True b. False

Q: All of the following are recommended features of a fire protection system for a computer center except a. clearly marked exits b. an elaborate water sprinkler system c. manual fire extinguishers in strategic locations d. automatic and manual alarms in strategic locations

Q: Some companies separate systems analysis from programming/program maintenance. All of the following are control weaknesses that may occur with this organizational structure except a. systems documentation is inadequate because of pressures to begin coding a new program before documenting the current program b. illegal lines of code are hidden among legitimate code and a fraud is covered up for a long period of time c. a new systems analyst has difficulty in understanding the logic of the program d. inadequate systems documentation is prepared because this provides a sense of job security to the programmer

Q: A firm that follows an aggressive current asset financing approach uses primarily short-term credit and thus is more exposed to an unexpected increase in interest rates than is a firm that uses long-term capital and thus follows a conservative financing policy. a. True b. False

Q: The maturity matching, or "self-liquidating," approach to financing involves obtaining the funds for permanent current assets with a combination of long-term capital and short-term capital that varies depending on the level of interest rates. When short-term rates are relatively high, short-term assets will be financed with long-term debt to reduce costs. a. True b. False

Q: The least important item to store off-site in case of an emergency is a. backups of systems software b. backups of application software c. documentation and blank forms d. results of the latest test of the disaster recovery program

Q: Uncertainty about the exact lives of assets prevents precise maturity matching in an ex post (i.e., after the fact) sense even though it is possible to match maturities on an ex ante (expected) basis. a. True b. False

Q: For most companies, which of the following is the least critical application for disaster recovery purposes? a. month-end adjustments b. accounts receivable c. accounts payable d. order entry/billing

Q: Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive current operating asset financing strategy because of the inherent risks of using short-term financing. a. True b. False

Q: An advantage of a recovery operations center is that a. this is an inexpensive solution b. the initial recovery period is very quick c. the company has sole control over the administration of the center d. none of the above are advantages of the recovery operations center

Q: A conservative current operating asset financing approach will result in permanent current assets and some seasonal current assets being financed using long-term securities. a. True b. False

Q: The major disadvantage of an empty shell solution as a second site backup is a. the host site may be unwilling to disrupt its processing needs to process the critical applications of the disaster stricken company b. recovery depends on the availability of necessary computer hardware c. maintenance of excess hardware capacity d. the control of the shell site is an administrative drain on the company

Q: The concept of permanent current operating assets reflects the fact that some components of current assets do not shrink to zero even when a business is at its seasonal or cyclical low. Thus, permanent current operating assets represent a minimum level of current assets that must be financed. a. True b. False

Q: A cold site backup approach is also known as a. internally provided backup b. recovery operations center c. empty shell d. mutual aid pact

Q: An increase in any current asset must be accompanied by an equal increase in some current liability. a. True b. False

Q: Which of the following is not an essential feature of a disaster recovery plan? a. off-site storage of backups b. computer services function c. second site backup d. critical applications identified

Q: Determining a firm's optimal investment in working capital and deciding how that investment should be financed are critical to working capital management. a. True b. False

Q: All of the following are control risks associated with the distributed data processing structure except a. lack of separation of duties b. system incompatibilities c. system interdependency d. lack of documentation standards

Q: Which organizational structure is most likely to result in good documentation procedures? a. separate systems development from systems maintenance b. separate systems analysis from application programming c. separate systems development from data processing d. separate database administrator from data processing

Q: Hardwig Inc.Hardwig Inc. is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total $3,600,000, its fixed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.2.Refer to the data for Hardwig, Inc.Assume now that the company believes that if it adopts a restricted policy, its sales will fall by 15% and EBIT will fall by 10%, but its total assets turnover, debt ratio, interest rate, and tax rate will all remain the same. In this situation, what's the difference between the projected ROEs under the restricted and relaxed policies?a. 2.24%b. 2.46%c. 2.70%d. 2.98%e. 3.27%

Q: Systems development is separated from data processing activities because failure to do so a. weakens database access security b. allows programmers access to make unauthorized changes to applications during execution c. results in inadequate documentation d. results in master files being inadvertently erased

Q: Hardwig Inc.Hardwig Inc. is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total $3,600,000, its fixed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.2.Refer to the data for Hardwig, Inc. What's the difference in the projected ROEs under the restricted and relaxed policies?a. 1.20%b. 1.50%c. 1.80%d. 2.16%e. 2.59%

Q: Which is the most critical segregation of duties in the centralized computer services function? a. systems development from data processing b. data operations from data librarian c. data preparation from data control d. data control from data librarian

Q: Hardwig Inc.Hardwig Inc. is considering whether to pursue a restricted or relaxed current asset investment policy. The firm's annual sales are expected to total $3,600,000, its fixed assets turnover ratio equals 4.0, and its debt and common equity are each 50% of total assets. EBIT is $150,000, the interest rate on the firm's debt is 10%, and the tax rate is 40%. If the company follows a restricted policy, its total assets turnover will be 2.5. Under a relaxed policy its total assets turnover will be 2.2.Refer to the data for Hardwig Inc. If the firm adopts a restricted policy, how much lower would its interest expense be than under the relaxed policy?a. $8,418b. $8,861c. $9,327d. $9,818e. $10,309

Q: Buchholz Corporation follows a moderate current asset investment policy, but it is now considering a change, perhaps to a restricted or maybe to a relaxed policy. The firm's annual sales are $400,000; its fixed assets are $100,000; its target capital structure calls for 50% debt and 50% equity; its EBIT is $35,000; the interest rate on its debt is 10%; and its tax rate is 40%. With a restricted policy, current assets will be 15% of sales, while under a relaxed policy they will be 25% of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?a. 4.25%b. 4.73%c. 5.25%d. 5.78%e. 6.35%

Q: Adequate backups will protect against all of the following except a. natural disasters such as fires b. unauthorized access c. data corruption caused by program errors d. system crashes

Q: Short-term marketable securities are held for two separate and distinct purposes: (1) to provide liquidity as a substitute for cash and (2) as a non-operating investment. Marketable securities held while awaiting reinvestment are not available for liquidity purposes. a. True b. False

Q: Participation in system development activities include: a. system analysts, database designers and programmers b. managers and operating personnel who work directly with the system c. accountants and auditors d. all of the above

Q: Net operating working capital is defined as operating current assets minus operating current liabilities.. a. True b. False

Q: In a computer-based information system, which of the following duties needs to be separated? a. program coding from program operations b. program operations from program maintenance c. program maintenance from program coding d. all of the above duties should be separated

Q: Net working capital is defined as current assets divided by current liabilities. a. True b. False

Q: Segregation of duties in the computer-based information system includes a. separating the programmer from the computer operator b. preventing management override c. separating the inventory process from the billing process d. performing independent verifications by the computer operator

Q: Net working capital, defined as current assets minus the sum of payables and accruals, is equal to the current ratio minus the quick ratio. a. True b. False

Q: All of the following are issues of computer security except a. releasing incorrect data to authorized individuals b. permitting computer operators unlimited access to the computer room c. permitting access to data by unauthorized individuals d. providing correct data to unauthorized individuals

Q: Which of the following will cause an increase in net working capital, other things held constant? a. A cash dividend is declared and paid. b. Merchandise is sold at a profit, but the sale is on credit. c. Long-term bonds are retired with the proceeds of a preferred stock issue. d. Missing inventory is written off against retained earnings. e. Cash is used to buy marketable securities.

Q: A ROC is generally shared with multiple companies.

Q: Critical applications should be identified and prioritized by the user departments, accountants, and auditors.

Q: Best Bagels, Inc. (BB)Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. BB's current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock outstanding selling at a price per share of $23.08.Refer to the data for Best Bagels, Inc. (BB). Now assume that BB is considering changing from its original capital structure to a new capital structure with 45% debt and 55% equity. This results in a weighted average cost of capital equal to 10.4% and a new value of operations of $576,923. Assume BB raises $259,615 in new debt and purchases T-bills to hold until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase?a. $14.42b. $19.36c. $23.91d. $28.85e. $35.62

Q: Best Bagels, Inc. (BB)Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. BB's current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock outstanding selling at a price per share of $23.08.Refer to the data for Best Bagels, Inc. (BB). Now assume that BB is considering changing from its original capital structure to a new capital structure with 45% debt and 55% equity. This results in a weighted average cost of capital equal to 10.4% and a new value of operations of $576,923. Assume BB raises $259,615 in new debt and purchases T-bills to hold until it makes the stock repurchase. BB then sells the T-bills and uses the proceeds to repurchase stock. How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?a. 11,001; $28.85b. 12,711; $35.62c. 13,901; $42.57d. 15,220; $54.31e. 17,105; $89.67

Q: A mutual aid is the lowest cost disaster recovery option, but has shown to be effective and low risk.

Q: VanMannen Foundations, Inc. (VF)VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown below. Now the company is considering using some debt, moving to the market value capital structure indicated below. The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below.EBIT = $80,000 New Debt/Value = 20%Growth = 0% New Equity/Value = 80%Orig cost of equity, rs = 10.0% No. of shares = 10,000New cost of equity = rs = 11.0% Price per share = $48.00Tax rate = 40% Interest rate = rd = 7.0%Refer to the data for VanMannen Foundations, Inc. (VF).What would the stock price be if VF issued the new debt and immediately used the proceeds to repurchase stock?a. $49.43b. $50.70c. $52.00d. $53.33e. $56.00

Q: An advantage of distributed data processing is that individual end user groups set specific IT standards without concern for the broader corporate needs.

Q: A generally accepted advantage of IT outsourcing is improved security.

Q: VanMannen Foundations, Inc. (VF)VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown below. Now the company is considering using some debt, moving to the market value capital structure indicated below. The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below.EBIT = $80,000 New Debt/Value = 20%Growth = 0% New Equity/Value = 80%Orig cost of equity, rs = 10.0% No. of shares = 10,000New cost of equity = rs = 11.0% Price per share = $48.00Tax rate = 40% Interest rate = rd = 7.0%Refer to the data for VanMannen Foundations, Inc. (VF).Now assume that VF is considering changing from its original zero debt capital structure to a new capital structure with even more debt. This results in changes in the cost of debt and equity, and thus to a new WACC and a new value of operations. Assume VF raises the amount of new debt indicated below and uses the funds to purchase and hold T-bills until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase?Debt/Value = 40% Value of new debt = $213,333Equity/Value = 60% New WACC = 9.0%a. $50.67b. $53.33c. $56.00d. $58.80e. $61.74

Q: Specific IT assets support an organization's strategic objectives.

Q: Pennewell Publishing Inc. (PP)Pennewell Publishing Inc. (PP) is a zero growth company. It currently has zero debt and its earnings before interest and taxes (EBIT) are $80,000. PP's current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00.Refer to the data for Pennewell Publishing Inc. (PP). Assume that PP is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity. This results in a weighted average cost of capital equal to 9.4% and a new value of operations of $510,638. Assume PP raises $178,723 in new debt and purchases T-bills to hold until it makes the stock repurchase. PP then sells the T-bills and uses the proceeds to repurchase stock. How many shares remain after the repurchase, and what is the stock price per share immediately after the repurchase?a. 7,500; $71.49b. 7,000; $59.57c. 6,500; $51.06d. 6,649; $53.33e. 6,959; $58.78

Q: Commodity IT assets include such things are network management.

Q: Pennewell Publishing Inc. (PP)Pennewell Publishing Inc. (PP) is a zero growth company. It currently has zero debt and its earnings before interest and taxes (EBIT) are $80,000. PP's current cost of equity is 10%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00.Refer to the data for Pennewell Publishing Inc. (PP). Assume that PP is considering changing from its original capital structure to a new capital structure with 35% debt and 65% equity. This results in a weighted average cost of capital equal to 9.4% and a new value of operations of $510,638. Assume PP raises $178,723 in new debt and purchases T-bills to hold until it makes the stock repurchase. What is the stock price per share immediately after issuing the debt but prior to the repurchase?a. $45.90b. $48.12c. $51.06d. $53.33e. $58.75

Q: An often-cited benefit of IT outsourcing is improved core business performance.

Q: Merriwether Building has operating income of $20 million, a tax rate of 40%, and no debt. It pays out all of its net income as dividends and has a zero growth rate. The current stock price is $40 per share, and it has 2.5 million shares of stock outstanding. If it moves to a capital structure that has 40% debt and 60% equity (based on market values), its investment bankers believe its weighted average cost of capital would be 10%. What would its stock price be if it changes to the new capital structure?a. $40b. $48c. $52d. $54e. $60

Q: Which of the following statements is CORRECT? a. The capital structure that maximizes the stock price is also the capital structure that maximizes earnings per share. b. The capital structure that maximizes the stock price is also the capital structure that maximizes the firm's times interest earned (TIE) ratio. c. Increasing a company's debt ratio will typically reduce the marginal costs of both debt and equity financing; however, this still may raise the company's WACC. d. If Congress were to pass legislation that increases the personal tax rate but decreases the corporate tax rate, this would encourage companies to increase their debt ratios. e. The capital structure that maximizes the stock price is also the capital structure that minimizes the weighted average cost of capital (WACC).

Q: Fault tolerance is the ability of the system to continue operation when part of the system fails due to hardware failure, application program error, or operator error.

Q: Virtualization is the technology that unleased cloud computing.

Q: Daylight Solutions is considering a recapitalization that would increase its debt ratio and increase its interest expense. The company would issue new bonds and use the proceeds to buy back shares of its common stock. The company's CFO thinks the plan will not change total assets or operating income, but that it will increase earnings per share (EPS). Assuming the CFO's estimates are correct, which of the following statements is CORRECT? a. If the plan reduces the WACC, the stock price is also likely to decline. b. Since the plan is expected to increase EPS, this implies that net income is also expected to increase. c. If the plan does increase the EPS, the stock price will automatically increase at the same rate. d. Under the plan there will be more bonds outstanding, and that will increase their liquidity and thus lower the interest rate on the currently outstanding bonds. e. Since the proposed plan increases Daylight's financial risk, the company's stock price still might fall even if EPS increases.

Q: Anson Jackson Court Company (AJC)The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00.Refer to the data for the Anson Jackson Court Company (AJC). The firm is considering moving to a capital structure that is comprised of 40% debt and 60% equity, based on market values. The new funds would be used to replace the old debt and to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on debt to rise to 7%, while the required rate of return on equity would rise to 9.5%. If this plan were carried out, what would be AJC's new WACC and total value?a. 7.38%; $800,008b. 7.38%; $813,008c. 7.50%; $813,008d. 7.50%; $790,008e. 7.80%; $790,008

Q: A database administrator is responsible for the receipt, storage, retrieval, and custody of data files.

Q: Commodity IT assets easily acquired in the marketplace and should be outsourced under the core competency theory.

Q: Anson Jackson Court Company (AJC)The Anson Jackson Court Company (AJC) currently has $200,000 market value (and book value) of perpetual debt outstanding carrying a coupon rate of 6%. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. AJC's current cost of equity is 8.8%, and its tax rate is 40%. The firm has 10,000 shares of common stock outstanding selling at a price per share of $60.00.Refer to the data for the Anson Jackson Court Company (AJC). What is AJC's current total market value and weighted average cost of capital?a. $600,000; 7.5%b. $600,000; 8.0%c. $800,000; 7.0%d. $800,000; 7.5%e. $800,000; 8.0%

Q: Transaction cost economics (TCE) theory suggests that firms should outsource specific noncore IT assets

Q: Best Bagels, Inc. (BB)Best Bagels, Inc. (BB) currently has zero debt. Its earnings before interest and taxes (EBIT) are $100,000, and it is a zero growth company. BB's current cost of equity is 13%, and its tax rate is 40%. The firm has 20,000 shares of common stock outstanding selling at a price per share of $23.08.Refer to the data for Best Bagels, Inc. (BB). BB is considering moving to a capital structure that is comprised of 20% debt and 80% equity, based on market values. The debt would have an interest rate of 7%. The new funds would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise to 14%. If this plan were carried out, what would BB's new value of operations be?a. $498,339b. $512,188c. $525,237d. $540,239e. $590,718

Q: RAID is the use of parallel disks that contain redundant elements of data and applications.

Q: VanMannen Foundations, Inc. (VF)VanMannen Foundations, Inc. (VF) is a zero-growth company that currently has zero debt, and it has the data shown below. Now the company is considering using some debt, moving to the market value capital structure indicated below. The money raised would be used to repurchase stock. It is estimated that the increase in risk resulting from the additional leverage would cause the required rate of return on equity to rise somewhat, as indicated below.EBIT = $80,000 New Debt/Value = 20%Growth = 0% New Equity/Value = 80%Orig cost of equity, rs = 10.0% No. of shares = 10,000New cost of equity = rs = 11.0% Price per share = $48.00Tax rate = 40% Interest rate = rd = 7.0% Refer tothe data for VanMannen Foundations, Inc. (VF). If this plan were carried out, what would be VF's new WACC and its new value of operations? WACC Value a. 9.64% $497,925 b. 9.83% $507,884 c. 10.03% $518,041 d. 10.23% $528,402 e. 10.74% $538,970