Return on investment,NPV analysis
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1. The CEO of a highly profitable company, noticing that the excess cash not needed to fund business operations has accumulated in a company bank account that pays no interest, contemplates declaring and paying a cash dividend to common shareholders before year's end. The likely effect of paying the dividend would be to
A.have no effect on ROI because dividends are paid out of retained earnings.
B. decrease ROI because the investment in the business would decrease while income would be unchanged.
C.increase ROI because all shareholders prefer dividends to capital gains.
D.increase ROI because the investment in the business would decrease while income would be unchanged.
E.cannot be determined from the information given because paying a dividend decreases profit and investment.
2. Which of the following statements is closer to the truth?
A.The working capital invested in a project can never be recovered.
B. The working capital injected into a project is recovered when the project is wound down.
3. Consider the following three conditions:
I. An increase in sales
II. An increase in operating assets
III. A reduction in expenses
Which of the above conditions provide a way in which a manager can improve return on investment?
A.Only I
B.Only I and II
C.Only I and III
D.Only II and III
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Solution Summary
The response discusses return on investment, NPV analysis. Decreased ROI on investments in the business are determined.
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1. The CEO of a highly profitable company, noticing that the excess cash not needed to fund business operations has accumulated in a company bank account that pays no interest, contemplates declaring and paying a cash dividend to common shareholders before year's end. ...
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