You are being asked to consider selling one of your regional divisions to a private equity company. The private equity company has just offered you $1.2 million for the regional division. The division is expected to provide your company net annual cash flows of $175,000 for each of the next 10 years without you having to make any additional investments in the division. Your team has calculated information to help you make your decision, as follows. A) Your company's WACC is 7.9%
B) Your hurdle rate for this potential sale is 11.2%
C) The Net Present Value of this opportunity to your company using WACC as your discount rate is (-$20,420.78)
D) The likely Net Present Value of the division to the private equity company following the sale is $13,776.23
Which of the following answers is correct given the information provided above?
1) The IRR of the project to your company is between 7.9% and 11.2%
2) The hurdle rate for the private equity company is higher than the hurdle rate for your company
3) The IRR of the project to your company is below 7.9%
4) None of the Above

Daniel owns 100 shares of abc corporation's common stock. abc uses the fair value option, and recent declines in the firm's credit rating have caused the value of the firm's outstanding bonds payable to drop by 10%. daniel feels this is good news, but he wants to know what you think about the situation. which of the following represents your best response? a : "this situation may be positive for you in that the change in abc's credit standing indicates that the value of the firm's assets is likely increasing. however, the drop in bond value may negate any positive effects on your bottom line, because it means your claim on the firm's assets is simultaneously decreasing." b : "actually, this is bad news all around. the drop in the value of abc's bonds payable means shareholders' claims on the firm's assets have decreased. moreover, abc's declining credit rating means that the firm's assets are probably also dropping in value, thus magnifying your losses even more." c : "on the surface, this seems like good news because it means your claim on the firm's assets has increased. however, the drop in creditworthiness may also indicate that abc's assets are declining in value, thus offsetting any gains associated with the drop in bonds payable." d : "you're right! this is good news because it means that abc's debtholders have a decreased claim on the firm's assets. as a result, the firm's existing shareholders"like you"have seen their claim on the firm's assets increase."

The winston company estimates that the factory overhead for the following year will be $1,250,000. the company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. the total machine hours for the year were 54,300. the actual factory overhead for the year were $1,375,000. determine the over- or underapplied amount for the year.

The school cafeteria can make pizza for approximately $0.30 a slice. the cost of kitchen use and cafeteria staff runs about $200 per day. the pizza den nearby will deliver whole pizzas for $9.00 each. the cafeteria staff cuts the pizza into eight slices and serves them in the usual cafeteria line. with no cooking duties, the staff can be reduced by half, for a fixed cost of $75 per day. should the school cafeteria make or buy its pizzas?