Which of the Following Scenarios Carries the Greatest Risk of NOT

question 54

Multiple Choice

Which of the following scenarios carries the greatest risk of NOT being able to meet required payments (capital expenditure, dividend, interest and principal requirements) totaling $96 million?

• A) Expected cash flow, $116 million, standard deviation $5 million
• B) Expected cash flow, $107 million, standard deviation $5.5 million
• C) Expected cash flow, $112 million, standard deviation $8 million
• D) Expected cash flow, $134 million, standard deviation $38 million

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Definitions:

Net Present Value

The calculation used to determine the current value of a series of future cash flows, adjusted for time and interest.

Acquisition Cost

is the total cost incurred to acquire an asset, investment, or property, which includes the purchase price and all associated expenses.

Common Stock

A type of security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Cash Purchase

A transaction method in which goods or services are paid for in full with cash at the time of purchase.