Under the Following Conditions, What Are the Expected Returns for Stocks

question 115

Multiple Choice

Under the following conditions, what are the expected returns for stocks X and Y?

• A) 14.1 percent and 12.9 percent
• B) 12.5 percent and 19.5 percent
• C) 19.5 percent and 18.5 percent
• D) 21.2 percent and 18.5 percent
• E) 11.5 percent and 15.5 percent

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Definitions:

Non-Cash Items

Expenses or incomes recorded in accounting but do not involve any actual cash flow, such as depreciation, amortization, or stock-based compensation.

Capital Spending

Expenditures by a company for physical assets like property, industrial buildings, or equipment.

Net Working Capital

The financial difference marked by a company's present assets against its present liabilities, suggesting the company's economic condition in the short run.

Cash Flow

Cash flow refers to the net amount of cash and cash-equivalents being transferred into and out of a business, indicating its operational efficiency and liquidity.