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1)Multiple choice questions When prices of securities in a market reflect information about the historical return on equity, the range of takeover bids made to a company, and the daily company announcements, this market is said to be Select one: O not efficient semi-strongly efficient strongly efficient operationally efficient 2)Consider the following spider plot and the data table to answer the following questions (1 to 4)
1)Multiple choice questions When prices of securities in a market reflect information about the historical return on equity, the range of takeover bids made to a company, and the daily company announcements, this market is said to be Select one: O not efficient semi-strongly efficient strongly efficient operationally efficient
2)Consider the following spider plot and the data table to answer the following questions (1 to 4). Spider Plot $45,000 Annual Revenue Initial Investment Salvage Value ..Annual Expenses $30,000 $15,000 R ? D Present Worth ($) $15,000 A -$30,000 $45,000 -40% -30% 40% -20% - 10% 10% 20% 30% Percent Change (%) Project Data Initial Investment $900,000 Annual Revenue $200,000 Annual Expenses $60,000 Salvage Value $150,000 Project Life (years) 10
Expert Solution
1)
In semi-strong efficient market, prices of securities reflect all publicly known information including Return on equity and public announcements.
In strongly efficient market, prices of securities fully reflects all public and private information eg. Return on equity, public announcements and range of takeover bids made to a company,etc.
In not efficient market, prices of securities reflects only historical market data.
Operationally efficient market is a buy product of competition improving operating efficiency of the market.
Thus, answer is strongly efficient market.
2)
The project will be profitable
We see that if revenue increases, the project will move higher in the first quadrant implying higher NPV
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