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Afina-wow [57]
1 year ago
6

What is the cost of equity for a firm that has a beta of 1.2 if the risk-free rate of return is 2.9 percent and the expected mar

ket return is 11.4 percent?
Business
1 answer:
Gnesinka [82]1 year ago
8 0

13.1$ is the cost of equity for a firm that has a beta of 1.2 if the risk-free rate of return is 2.9 percent and the expected market return is 11.4 percent.

The cost of equity of a firm represents the compensation that the market demands in exchange for the asset ownership and bearing its risk. The traditional formula which comprises the cost of equity is the dividend capitalization model as well as the capital asset pricing model (CAPM).

Using the CAPM model or capital asset pricing model which determines the cost of equity financing would be equated as

Cost of Equity = Risk-Free Rate of Return + Beta × (Market Rate of Return – Risk-Free Rate of Return)

Here, the risk-free rate determines the minimum rate of return, to which the excess return is added.

Beta is referred to as the standard CAPM measure of systematic risk and has the tendency for the return of a security to move parallel with the whole return of the stock market.

In the CAPM model, the market return of an asset is the risk-free rate plus the premium which is multiplied by the beta of the asset.

So, here risk-free rate return RF=2.9

The expected market rate of return RM=11.4

Beta (β) =1.2

According to the CAPM model,

Cost of equity Re =RF+ β(RM-RF)

=2.9+1.2(11.4-2.9)

=2.9+10.2

=13.1

Therefore 13.1$ is the cost of equity.

Learn to know more about the estimation of the cost of equity by the CAPM model at,

brainly.com/question/13086476

#SPJ4

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Some part of income inequality is likely to be the result of discrimination. But other factors responsible for inequality includ
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Answer:

Differences in abilities and talents

Explanation:

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All individuals possess different skill sets and their efficiencies vary too. Some individuals are more creative and talented than others while some are more laborious and hardworking.

Each skill set has it's own demand and thus, income is fixed as per the demand of a particular skill set for a given sector.

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6 0
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Graham, Inc.'s April bank statement shows an April 30 balance of $5,120. Prior to reconciliation, its books show a cash balance
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Answer:

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Explanation:

The purpose of a bank reconciliation statement is to reconcile the difference between Cash Book balance and Bank Statement balance. Also it is used to check accuracy of Cash Book and the accuracy of Bank Statement.

Graham, Inc.'s April bank reconciliation statement is prepared as :

Graham, Inc.

Bank reconciliation statement as at April 30

Balance as per Bank Statement                 $5,120

Add outstanding lodgments                         $800

Add back error at the bank                            $115

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Balance as per Cash Book                        $5,570

therefore,

The reconciled cash balance at April 30 on the bank reconciliation should be $5,570.

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Answer:

Explanation:

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Had columbus's voyage acquired wealth for spain, he was supposed to keep what amount?
kotegsom [21]
He was supposed to keep 10%.
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3 years ago
​Heidi, Sergei,​ Shou-Ju, and Jesus form a general partnership to operate a sporting equipment store. After their first store is
denpristay [2]

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