Problem 1: As the cost of capital is increased, the:
a. IRR remains constant.
b. Payback period remains the same.
c. Discounted payback period increases.
d. Both "b" and c.
e. All of the above
Problem 2: In the event that Zoldt Corporation, which has a low P/E ratio, were to acquire Sky Corporation, which has a higher P/E ratio, an analyst can be certain that one of the following will occur.
a. Zoldt Corp. will see an immediate decrease in P/E.
b. Zoldt Corp. will see an immediate decrease in EPS.
c. Zoldt Corp. will see an immediate increase in the growth rate of EPS.
d. Zoldt Corp. will see an immediate increase in EPS.
Problem 3: If a company's average collection period is higher than the industry average, then the company might be:
a. Enforcing credit conditions upon its customers which are too stringent.
b. Allowing its customers too much time to pay their bills.
c. Too tough in collecting its accounts.
d. Too liquid.