A Linear Probability Model You Have Developed Finds There Are

question 59

Multiple Choice

A linear probability model you have developed finds there are two factors influencing the past bankruptcy behavior of firms: the equity multiplier and the total asset turnover ratio. Based on past bankruptcy experience, the linear probability model is estimated as:
PD_i = 0.02 (equity multiplier) + 0.01 (total asset turnover)
A firm you are thinking of lending to has an equity multiplier of 3.2 times and a total asset turnover ratio of 1.95. Calculate the firm's expected probability of default, or bankruptcy.

• A) 7.06 percent
• B) 7.92 percent
• C) 8.35 percent
• D) 9.12 percent

Define the role of strategic control and knowledge transfer in international assignments.

Understand the challenges and strategies for forecasting HR demand and workforce planning in an international context.

Grasp the significance of aligning SIHRM practices with the firm's strategic goals.

Acknowledge the importance of understanding local labor markets, industries, and culture for SIHRM.

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Definitions:

Net Advantage

The benefit or gain that results from a specific course of action, minus any associated costs.

Resale Value

The estimated value for which an asset can be sold in the marketplace after some period of use.

Depreciation Tax Shield

A reduction in taxable income for firms, achieved through claiming depreciation expenses, thereby lowering the tax liability.

Corporate Tax Rate

The percentage of a corporation's taxable income that is paid as tax to the government, varying by country and sometimes within regions of a country.