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
Alenkinab [10]
3 years ago
13

The Sugar Cookie Company just paid its annual dividend of $.45 a share. The stock has a market price of $21 and a beta of.88. Th

e return on Treasury bills is 4.2 % and the market has an 11.8 % rate of return. What is the cost of equity for the Cookie Company?
Business
2 answers:
Juliette [100K]3 years ago
8 0

Answer:

The cost of equity based on the CAPM is 10.888%

Explanation:

The cost of equity of the stock or the required rate of return (r) is the minimum return required by investors to invest in a stock. The CAPM approach provides an equation to calculate the required rate of return (r) based on the risk free rate, stock's beta and the market risk premium. The formula for r is,

r = rRF + Beta * (rM - rRF)

Where,

  • rRF is the risk free rate or rate on T bills
  • rM is the expected return on market

r = 0.042 + 0.88 * (0.118 - 0.042)

r = 0.10888 or 10.888%

mixer [17]3 years ago
5 0

Answer:

Cost of equity is 10.9%

Explanation:

Cost Asset Pricing model will be used for the calculations of cost of equity.

Capital asset pricing model measure the expected return on an asset or investment. It is used to make decision for addition of specific investment in a well diversified portfolio.

In this Question the 4.2% of return on Treasury is Risk free rate, market return is 11.8% ans associated beta is 0.88.

Formula for CAPM

Expected return = Risk free rate + beta ( Market return - Risk free rate )

Expected return = 4.2% + 0.88 ( 11.8% - 4.2% )

Expected return = 4.2% + 6.688%

Expected return = 10.888% = 10.9%

You might be interested in
Magic Realm, Inc., has developed a new fantasy board game. The company sold 45,000 games last year at a selling price of $66 per
storchak [24]

Answer:

Please see below and attached.

Explanation:

1a. Prepare a contribution format income statement for the game last year. The Net operating income is $90,000.

1-b The degree of operating leverage

= $10.

2a. Net operating income increases by 220%

2b. Total expected net operating income is $288,000.

Please find attached detailed breakdown of the answers provided above

7 0
4 years ago
How did the new deal change the relationship between business and labor?
Hitman42 [59]
It bettered their relationship

do you have answer choices
6 0
3 years ago
If a company spends $20 million to install new footwear-making equipment with capacity to produce 1 million pairs of athletic fo
labwork [276]

Answer: 10% or $2,000,000

Explanation:

Seeing as no figures were produced, we will have to do this ourselves.

We will make assumptions which include the following,

Life of the equipment = 10 Years

Salvage value = 0

Those are our 2 assumptions.

In that case then,

The Annual Depreciation will be,

Depreciation = (Cost of equipment - Estimated salvage value) / Estimated useful life

= (20 - 0) / 10

= $2 million

Seeing as 2 million is,

= 2/20 * 100

= 10%

That would mean that annual depreciation costs at that facility will rise by $2 million or 10%.

If you need any clarification do react or comment.

3 0
3 years ago
Source: Tommy Stubbington and Ben​ Edwards, open double quoteU.K. to Repay First World War ​Bonds,close double quote Wall Street
xxMikexx [17]

Answer:

Follows are the solution to this question:

Explanation:

Its console shall be coordinated effort mutual funds which do not grow at all, and in every year they create a corrected degree of interest, that's why Its bond paying a fixed rate of the coupon but not maturing.

\text{Consolation price} =\frac{\text{Set amount of coupon}}{\text{Return Rate}}

                            = \frac{35}{2.5\%} \\\\ = \frac{35\times 100}{2.5} \\\\   = \frac{35\times 1000}{25} \\\\  = \frac{7\times 1000}{5} \\\\  = 7\times 200 \\\\= 1400

It's the price that the government needs to offer shareholders.

5 0
3 years ago
What account form needs to balance before you can move forward with the Accounting Cycle?
zhannawk [14.2K]

Answer:

Clyde's Well Servicing has the following financial statements. The balance sheet items, profit margin, and dividend payout have maintained the same ...

Explanation:

8 0
2 years ago
Other questions:
  • _____ is the incremental cost of wear and tear on an asset.
    12·1 answer
  • A matrix organization for project management has a distinct advantage because:A) Dual hierarchies mean two bosses.B) A significa
    6·1 answer
  • Which of the following statements is true? A. Expenses are decreased by debits. B. Liabilities are decreased by credits. C. Reve
    9·1 answer
  • A constant debt-to-GDP ratio in a growing economy is consistent with:
    7·1 answer
  • Assume that the 4K and OLED television sets industry is perfectly competitive. Suppose a producer develops a successful innovati
    5·1 answer
  • When writing a ____________________ one could state how often a supplier will provide a service or how quickly a firm will respo
    7·1 answer
  • I need help on this question please
    12·1 answer
  • Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The jou
    9·1 answer
  • Direct Materials Variances Bellingham Company produces a product that requires 2.5 standard pounds per unit. The standard price
    7·1 answer
  • In your own words, what is a franchise?
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!