Huxtable Medical's CFO Recently Estimated That the Company's EVA for the Past

question 91

Multiple Choice

Huxtable Medical's CFO recently estimated that the company's EVA for the past year was zero. The company's cost of equity capital is 14 percent, its cost of debt is 8 percent, and its debt ratio is 40 percent. Which of the following statements is most correct?

• A) The company's net income was zero.
• B) The company's net income was negative.
• C) The company's ROA was 14 percent.
• D) The company's ROE was 14 percent.
• E) The company's after-tax operating income was less than the total dollar cost of capital.

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Definitions:

Z-test

A method of statistical analysis that evaluates whether there is a significant difference between the means of two populations, given known variances and a large sample size.

µ = 109

Represents the mean (µ) of a dataset or distribution, here specifically stated as 109.

Z-statistic

A specific kind of norm score that shows the number of standard deviations by which an individual item deviates from the distribution's average.

Critical Value

The threshold in a statistical test that defines the boundary for rejecting the null hypothesis.