Refer to the Data Provided in Table 11 -Refer to Table 11

question 99

Multiple Choice

Refer to the data provided in Table 11.1 below to answer the following question(s) .
Table 11.1 $$\begin{array}{l}\begin{array} { l c c } &\text { Total Investment }&\text {Expected Rate of Return }\\ { \text { Project } } & \text { (dollars) } & \text { (percentage) } \\\hline \text { New tablet computer for sales staff } & \$ 500,000 & 22 \\\text { Remodel for distribution center } & \$ 400,000 & 18 \\\text { On-site day care center } & \$ 200,000 & 10 \\\text { Employee fitness center } & \$ 100,000 & 8\end{array}\end{array}$$
-Refer to Table 11.1. If the interest rate is 20%, Nashbar Bicycle should

• A) fund only the purchase of new tablet computers for its sales staff.
• B) fund all of the projects except for the purchase of new tablet computers for its sales staff.
• C) fund all of the projects.
• D) not fund any of the projects.

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Definitions:

Risk Free Rate

An interest rate at which an investor expects to earn on an investment with zero risk.

Expected Constant Growth Rate

The steady rate at which a company’s dividends or earnings are anticipated to grow indefinitely.

Intrinsic Value

An estimate of the true value of an asset, including tangibles and intangibles, based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.

Beta Coefficient

An index of a security's fluctuation in value as compared to the broader market, signifying its relative risk versus the average market risk.