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lisov135 [29]
2 years ago
7

Rossdale Co. stock currently sells for $72.87 per share and has a beta of 1.22. The market risk premium is 7.10 percent and the

risk-free rate is 2.90 percent annually. The company just paid a dividend of $4.29 per share, which it has pledged to increase at an annual rate of 3.45 percent indefinitely. What is your best estimate of the company's cost of equity?
Business
1 answer:
Paul [167]2 years ago
7 0

Answer:

Cost of Equity =11.56%

Explanation:

The cost of equity can be determined using any of the following methods:

  1. The Dividend Valuation Model(DVM)
  2. Capital Asset Pricing Model (CAPM)

The Dividend Valuation Model(DVM) is a technique used to value the worth of an asset.

According to this model, the value of an asset is the sum of the present values of the future cash flows would that arise from the asset discounted at the required rate of return.  

Price = D/Kp

D- Dividend payable

Kp- cost of preferred stock

The capital asset pricing model (CAPM): relates the price of a share to the market risk or systematic risk. The systematic risk is that which affects all the all the economic agents, e.g inflation, interest rate e.t.c  

This CAPM is considered superior to DVM because it incorporates risk. Hence, we will use the CAPM  

Using the CAPM , the expected return on a asset is given as follows:  

E(r)= Rf +β(Rm-Rf)  

E(r) =? , Rf- 2.90%, Rm-Rf- 7.10% β- 1.22

E(r) = 2.90% + 1.22×(7.10)% = 11.562  %

Cost of Equity =11.56%

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A company's weekly payroll amounts to $50,000 and payday for the week is every friday. employees work five days per week, monday
salantis [7]

The total payroll amount is $50,000 per week.

Since there are only 5 work days per week (Monday to Friday), therefore the employees wage per day is:

Employees wage per day = $50,000 / 5 = $10,000

For the payday on April 4, the wages expense covered for this would be from April 1 to April 4 since the accounting period ended on March 31. Therefore wages expense in the journal entry would be calculated using 4 days.

Wages expense for April for the payday April 4 = Employees wage per day * Number of days

Wages expense for April for the payday April 4 = $10,000 * 4

<span>Wages expense for April for the payday April 4 = $40,000</span>

7 0
2 years ago
A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective
stira [4]

<em>Answer</em>:

<u>$52,000</u>

Explanation:

Remember, the FIFO inventory costing method records the inventory value based on the cost of the earliest (first) purchased or in hand balance.

The effective tax rate would usually be applied after the sales, however using FIFO we assume the first value of the inventory prior to the tax deduction.

= 4000 x $13

= $52,000

Therefore, the gross profit for the period is $52,000.

4 0
2 years ago
Read 2 more answers
RST consulting has offices in different locations around the country. Each division is self-contained and caters to the needs of
victus00 [196]

Answer:

The correct answer is geographic structure.

Explanation:

An organizational structure is the official design of a company's staff. The structure clearly defines the relationships of subordination, the authority in decision-making, and the physical location of employees of various departments. A geographic organizational structure groups representatives of each functional department into units formed to serve a specific market or region. Geographic units can be highly effective if they are located within the regions that serve and employ workers in the local work environment.

3 0
3 years ago
structural unemployment can be caused by all of the following except: a) minimum wages. b) labor unions. c) efficiency wages. d)
olga2289 [7]

Structural unemployment can be caused by all of the following except fluctuations in the business cycle.

<h3>What is Structural unemployment ?</h3>

Structural unemployment is long-lasting unemployment that comes about due to shifts in an economy.

Structural unemployment is caused by a mismatch of skills between the unemployed and available jobs. Structural unemployed is caused by changes in the economy, such as deindustrialization, which leaves some unemployed workers unable to find work in new industries with different skill requirements.

This type of unemployment happens because though jobs are available, there's a mismatch between what companies need and what available workers offer.

For example, employees who produce a specialty clothing product that suddenly is no longer a trend might lose their position producing this specific product, causing structural unemployment.

To learn more about Structural unemployment , refer

https://brainly.in/question/46526856

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3 0
2 years ago
Hagman Company has 110 units in Finished Goods Inventory at the beginning of the accounting period. During the accounting​ perio
vivado [14]

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Beginning Finished Goods Inventory 110 units

 

During the accounting​ period:

Produced 190 units

Sold 300 units for $ 250 each.

All units incurred $ 75 in variable manufacturing costs

$ 22 in fixed manufacturing costs.

Hagman also incurred $ 7400 in Fixed Selling and Administrative​ Costs.

Absorption:

Cost of goods sold= (variable manufacturing costs + fixed manufacturing costs)*units sold= (75+22)*300= 29,100

Operating income= sales - cogs - fixed selling and administrative costs= 75000 - 29100 - 7400= $38,500

Variable:

Variable costs= 75*300= 22500

Operating income= sales - variable costs - fixed manufacturing costs (of production) - fixed selling and administrative costs=

Operating income= 75000 - 225000 - (22*190) - 7400= $40,920

8 0
3 years ago
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