Use the Information for the Question(s) Below

question 36

Multiple Choice

Use the information for the question(s) below.
The Aardvark Corporation is considering launching a new product and is trying to determine an appropriate discount rate for evaluating this new product. Aardvark has identified the following information for three single division firms that offer products similar to the one Aardvark is interested in launching:

-The unlevered cost of capital for Armadillo Industries is closest to:

• A) 10.3%
• B) 10.1%
• C) 9.5%
• D) 9.9%

---

Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations using its current assets.

Ratio Manipulation

Ratio manipulation is the practice of altering financial figures or ratios in a company's financial statements in order to present a more favorable image of its financial health or performance.

Financial Leverage

The use of borrowed funds to increase the potential return on investment, amplifying both gains and losses.

Profit Margin

A financial metric that measures the percentage of revenue that exceeds the costs of goods sold, indicating the efficiency in which a company turns sales into profits.