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k0ka [10]
1 year ago
15

what is the cost of equity using the capital asset pricing model if the risk free rate is 4.5%, the beta is 1.75 and the equity

risk premium is 4.25%?
Business
1 answer:
dimulka [17.4K]1 year ago
3 0

The cost of equity is a term used in finance to describe the return (usually expressed as a rate of return) that a firm theoretically offers to its equity investors, or shareholders, in order to make up for the risk they assume by investing their money. A firm needs cash from various sources in order to operate and grow. Those individuals and organizations who are willing to offer money to others naturally desire payment. Just as landlords want rent for their homes, capital providers seek returns on their investments that must be proportional to the level of risk involved.

Given :

Risk free rate = 4.5%

Beta = 1.75

Equity risk premium= 4.25%

To find :

Cost of equity

Solution :

Cost of equity is given by,

=Risk-Free Rate of Return + Beta × (Equity risk premium)

= 4.5+1.75×(4.25)

=4.5+7.4375

=11.9375%

To learn more about  finance refer to

https://brainly.in/question/51549985

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Points lying inside the production possibilities curve are attainable but reflect less total output than can be produced.

Production is the process of combining various tangible and intangible inputs to produce something for consumption. It is the act of creating an output, goods, or services that are of value and contribute to an individual's benefit.

Production is the process of making, harvesting, or creating something, or the quantity of something manufactured or harvested. An example of production is the manufacture of furniture. An example of production is harvesting corn for food. An example of production volume is the production volume of corn.

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1 year ago
A ____ of a product is an early working prototype of a product released to users for testing and feedback: A. beta versionb. sub
Masteriza [31]

Answer: Option A

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The beta version is provided by the company before the release date of the software to analyze the consumer reaction and to detect if there is any flaw.

5 0
3 years ago
The net present value (NPV) method estimates how much a potential project will contribute to
lapo4ka [179]

This answer requires that we fill in the blanks

  • The net present value (NPV) method estimates how much a potential project will contribute to shareholder wealth
  • The larger the NPV,  the more value the project adds; and added value means a higher stock price.
  • The NPV calculation assumes that cash inflows can be reinvested at the project's risk-adjusted WACC
  • When the firm is considering independent projects, if the project's NPV exceeds zero the firm should accept the project.
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What is the NPV?

In order to get the NPV we have to make the following calculations for the projects A and B.

This is calculated as

Project A

-900 + 620/1.08 + 395/1.08² + 200/1.08³ + 250/1.08⁴

= $355. 237

For the project B

We would have to perform similar calculation

Hence we would have

-900 + 620/1.08 + 395/1.08² + 200/1.08³ + 250/1.08⁴

= 378.98

From the calculations that we have done above, we can see that the value for project B is greater hence we have to choose project B.

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2 years ago
In order to take advantage of the high quality talent pool, Ernst & Young sets up operations in the Philippines and moves pa
Dmitriy789 [7]

Answer:

c. Offshoring.

Explanation:

Offshoring is the process by which an organisation relocates some of its business processes to another country. This is done to take gain a competitive advantage or to reduce cost. Operations such as manufacturing and accounting can be moved to another country.

Ernst & Young sets up operations in the Philippines and moves part of its tax services to the new facility to take advantage of the high quality talent pool there.

5 0
3 years ago
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Which type of organization means that there are few or no levels of managers in between the top people who run the company and t
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The type of organization is "flat organization".
Other names that are used for the flat organization are:
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The structure of flat organization alludes to having a generally modest number of layers in your organization's authoritative graph. This is because of a generally higher traverse of control and moderately less layers of administration.
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