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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

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BigorU [14]

Answer:

C) a local school district

Explanation:

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So if someone is seeking for a grant to fight malnutrition, they should go to their local authorities first and get in touch with the school district.

4 0
3 years ago
On April 11 of the current year, Zack Corporation had a market price of $48 per share of common stock. Its par value was $10 per
NikAS [45]

Answer:

The dividend yield for Zack Corporation 8%,the first option

Explanation:

The dividend yield is a measure of business performance used by investors which compares the dividend paid by a stock to its market price(price paid by investors to acquire the stock)

dividend per share for Zack Corporation is $3.90

market price per share is $48

dividend yield =$3.90/$48*100=8.13%

The correct option is the first option 8% since the figure above was simply rounded down to whole number

3 0
3 years ago
While the four Ps help us remember the basics components of the __________, they don't have significant relevance in the marketi
Paul [167]

Answer:

Marketing mix.

Explanation:

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7 0
3 years ago
"Net income for the period was $200,000. The retained earnings account had a beginning balance of $25,000. If the company paid d
solmaris [256]

Answer:

Retained earning balance at the end would be = $205,000

Explanation:

Retained earnings at the end = Retained earning at the beginning + Net income - Dividend paid

The net income would increase the balance of the retained earnings hence it is added to it.

The Dividend paid would be a cash outflow which would reduce the balance of the retained earnings, hence it is deducted from it.

So applying this to the question, we have

Retained earning balance at the end would be:

25,000 + 200,000 - 20,000 = $205,000

Retained earning balance at the end would be = $205,000

3 0
3 years ago
Solvency refers to: A. long-term ability to generate sufficient cash to satisfy plant capacity needs, fuel growth, and to repay
Papessa [141]

Answer:

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Solvency is defined as the long-term ability of a business the generate enough cash flow that will allow it to continue its operations and also to pay of its debt when due.

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4 0
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