Sienna Company has the following information for January. Cost of direct materials used in production $20,000 Direct labor 15,00
1 answer:
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Answer: Product Life cycle
Explanation: Product Life cycle is a concept used to describe the various stages which a product will have to undergo from the time of introduction into the market till the time it will eventually be out of the market. Different products have different life cycle,the life cycle is determined by different factors. The shape of a product's life cycle is that of a BELL SHAPE
The stages include Introductory stage, Growth stage, Stabilization stage and decline stage.
Answer (A):
Need more data to select the better adviser
<u>Explanation: </u>
Adviser A averaged 19% return on the investment which is more than that of Adviser B who averaged 16% return on investment. However, adviser A has a beta of 1.5 which is also greater than that of Adviser B who has a beta of 1. This means that adviser A made a more riskier investment and hence a higher average return on investment. We need more data to tell which adviser performed better in relation to each other.
Answer (B):
Investment Adviser B
<u>Explanation:</u>
= T-bill rate = 6%
= Market return = 14%
= Market risk premium = 14% - 6% = 8%
= Average Return by Adviser A =19%
= Beta of Adviser A = 1.5
= Average Return by Adviser B =16%
= Beta of Adviser B = 1
CAPM Equation is
<u>For Adviser A</u>
= 6 + 1.5 (14 - 6) = 18%
The expected average return for the investment is 18% which means that Adviser A over performed the market by 1 %
<u>For Adviser B</u>
= 6 + 1 (14 - 6) = 14%
The expected average return for the investment is 14% which means that the Adviser B over performed the market by 2 %
Clearly, Adviser B performed better than Adviser A.
Answer (C):
Adviser B
<u>Explanation:</u>
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In this part, the and
All else remains the same
We make similar calculation as in part B