1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
ExtremeBDS [4]
1 year ago
12

Scanlon Inc.'s CFO hired you as a consultant to help her estimate the cost of capital. You have been provided with the following

data: rRF = 4.10%; RPM = 5.25%; and b = 0.70. Based on the CAPM approach, what is the cost of equity from retained earnings?
a.9.25%
b.7.78%
c.7.08%
d.7.00%
e.8.47%
Business
1 answer:
VARVARA [1.3K]1 year ago
8 0

Option b. 7.78% is the correct answer. The cost of equity from retained earnings is 7.78% as per the CAPM approach

The relationship between systematic risk, or the general dangers of investing, and expected return for assets, particularly stocks, is described by the Capital Asset Pricing Model (CAPM).

A linear relationship between the required return on investment and risk is established by this financial model.

Retained earnings refer to the total earnings that a company has generated from its operations minus the dividends distributed among shareholders. The retained earnings are earnings reinvested in the business.

The calculation is shown below.

Cost of equity = Risk-free rate + (beta * Market risk premium)

Cost of equity = 4.10% + (0.70 * 5.25%)

Cost of equity = 4.10% + 3.675%

Cost of equity = 7.77% or 7.78%

Learn more about retained earnings:

brainly.com/question/14529006

#SPJ4

You might be interested in
Issuers of coupon bondsmake a single payment of principal when the bonds matures, but multiple payments of interest over the lif
qaws [65]

Answer:Make a single payment of principal when the bonds matured but multiple payment of interest over the life of the bond.

2.0600

Explanation:

Bonds normally has a life of span from one upward for which interest will be paid to the investors as compensation for use of their fund and the principal sum will be refunded on the expiration of the bond life.

The return on a bond is fixed as specified in the bond contract the inability to make payment as at when due may not affect the return obtainable from the bond initial contract.

3 0
3 years ago
Prepare journal entries to record the following four separate issuances of stock.
hram777 [196]

Explanation:

  • A.

                                                                    Debit            Credit

Cash                                                         $84,000

Common stock                                                                 $70,000

Paid-In Capital in Excess of Par Value                             $14,000

It's necessary to split the equity in two accounts because there is information about the par value

  • B.

Promotion Expenses                                $49,000

Common Stock                                                                  $3,500

Paid-In Capital in Excess of Par Value                             $45,500

It's necessary to split the equity in two accounts because there is information about the par value

  • C

Promotion Expensese                               $49,000

Common Stock                                                                   $49,000

It's not necessary to split the equity in two accounts because there is no information about the par value

  • D.

Cash                                                            $136,500

Preferred Stock                                                                   $87,500

Paid-In Capital in Excess of Par Value                                $49,000

It's necessary to split the equity in two accounts because there is information about the par value

5 0
4 years ago
The top management at Vermilion Inc. realized that there were some technical defects in the company's new manufacturing plant th
harkovskaia [24]

Answer: (C) Controlling

Explanation:

 The controlling is one of the type of management function that helps in managing the various types of organizational function and also it helps in achieve the desirable goals.

It basically take various types of corrective actions for effectively managing the resources and also helps in improving the performance of the company.

According to the given question, the controlling is one of the management function that efficiently illustrating the given scenario.

In the vermilion inc, the top management of the company realized that at the time of construction of the plant shows some technical defects and the technical specialists of an organization try to resolve the given issue.

Therefore, The given process is known as the controlling management function.

4 0
4 years ago
What is oligopoly?
Nutka1998 [239]

Answer: The answer is a market structure in which a very few large sellers dominate the market.

Explanation:

Oligopoly : This is a market structure in which there are few producers of product with close substitute.There are two forms of oligopoly which includes, oligopoly who produce homogenous goods and differentiated goods respectively. Since,the number of competitors in oligopoly is small the reactions of each producers are more important. They tend to look at the actions of other producers before taken a vital decision.

Oligopoly is a types of imperfect market structure which has the following features

When products are homogeneous there is no special preference, but when the products is branded the consumers have a choice.

A single price reigns where goods are the same .The reverse is the case where goods are heterogeneous goods.

Price cut are for the same product,while price cut can also occur through advertising war fought by competitors in the market.7

4 0
3 years ago
What is a standard is a
Kobotan [32]

Answer:

is the pattern that follows any of the variables that determine the benefit of an economic activity

a standard is the reference level of some factor of production

7 0
3 years ago
Other questions:
  • Fill in the blanks.
    14·1 answer
  • Show Stoppers is a monopoly provider of ticket services for the concerts and sporting events and their current service charge is
    7·1 answer
  • Coca-Cola Unbottled is an online forum where Coke fans and company insiders can "look at what's beyond the bottle," sharing post
    15·1 answer
  • Suzanne is an environmental activist who avoids buying paper-based products unless they are made from recycled paper. Which psyc
    7·1 answer
  • When Heidi Ganahl first started out with Camp Bow Wow, she spent a lot of time "micromanaging" things, but as time went by, she
    14·1 answer
  • Leaders must have the ability to communicate new ideas. <br><br>O True <br><br>O False
    5·2 answers
  • (Ignore income taxes in this problem.) Your Company has a truck that needs a new engine that would cost $35,000. This will exten
    13·1 answer
  • mprudential, Incorporated, has an unfunded pension liability of $750 million that must be paid in 25 years. To assess the value
    15·1 answer
  • Your customer is implementing Oracle Procurement Cloud applications with multiple Requisition Business Units. Each Business Unit
    5·1 answer
  • When finding the present or future value of an annuity using a financial calculator, the blank______ should be entered as a perc
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!