USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 24

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
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-Refer to Exhibit 4.5. Calculate the price weighted series for Dec 31, 2003, prior to the splits.

• A) 81.69
• B) 100.0
• C) 72.5
• D) 121.25
• E) 119.25

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Definitions:

Payback Period Method

A capital budgeting method that calculates the time required to recoup the cost of an investment, identifying the point where cash inflows equal cash outflows.

Profitability Index

A calculation used to assess the attractiveness of an investment or project, equal to the present value of future cash flows divided by the initial investment cost.

Net Present Value

The difference between the current value of cash inflows and the current value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.