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Veronika [31]
3 years ago
9

National Home Rentals has a beta of 1.06, a stock price of $17, and recently paid an annual dividend of $.92 a share. The divide

nd growth rate is 2.2 percent. The market has a rate of return of 11.2 percent and a risk premium of 7.3 percent. What is the estimated cost of equity using the average return of the CAPM and the dividend discount model?
Business
1 answer:
ANEK [815]3 years ago
4 0

Answer:

9.6845%

Explanation:

Market risk premium = Market return - Risk free rate

                             7.3 = 11.2 - Risk free rate

Risk free rate = 3.9%

(1) Use CAPM:

Cost of equity = Risk free rate + Beta × Market risk premium

                        = 3.9% + 1.06(7.3)

                        = 11.638%

(2) Use DDM :

Stock price = [Latest dividend × (1 + dividend growth rate)] ÷ (Cost of equity-dividend growth rate)

$17 = [0.92 (1 + 0.022)] ÷ (Cost of equity - 0.022)

Cost of equity = 7.731%

Cost of equity = average value from using DDM and CAPM

Cost of equity = 0.5 (7.731 + 11.638)

                        = 9.6845%

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Mamont248 [21]

Answer:

Explanation:

Answer:

On Dec 31, 2012 Lee's liability would be $9,500 (principal amount) and $38 (accrued interest)

Explanation:

Lees notes:

Dec. 13 Accepted a $9,500, 45-day, 8% note dated December 13 in granting Miranda Lee a time extension on her past-due account receivable.

First interest due = $9,500 x 8% x 45/360 = $95

On the 31st 18 days would have accrued of the 45days = 18/45 x $95 = $38

On Dec 31, 2012 Lee's liability would be $9,500 (principal amount) and $38 (accrued interest)

Debit Miranda Lee with $9,538

Credit interest on Receivables $38

Credit Account receivables account with $9,500

When the full interest became due we will pass an additional entry:

Dr. Lee with $58

Cr. Interest on receivables with $58

(Being the balance interest on receivables due )

On Jan 27 when Lee paid her interest and principal amount, we will:

Debit Account receivables with $9,500

Debit interest on receivables Account with $95

Credit Tomas account with $9,595

( being liquidation of Lee's indebtedness)

Tomas notes:

Mar 3, Accepted a $5,000, 10%, 90-day note dated March 3 in granting a time extension on the past-due account receivable of Tomas Company.

Let's recognize the full interest due first:

$5,000 x 10% x 90/360 = $125

At this time we will:

Debit Tomas with $5,125

Credit interest on receivables with $125

Credit Account Receivables account with $5,000

On June 1 when Tomas paid his interest and principal amount, we will:

Debit Accounts receivable with $5,000

Debit interest on receivables with $125

Credit Tomas account with $5,125

( being liquidation of Tomas indebtedness)

Hiroshi Cheng notes:

Accepted a $2,000, 30-day, 9% note dated March 17 in granting Hiroshi Cheng a time extension on his past-due account receivable.

Interest = $2,000 x 9% x 30/360 = $15

The entries recognizing this liability will be to :

Debit Cheng Account with $2,015

Credit interest on receivables with $15

Credit Accounts receivable with $2,000

(Being receivables payable balance and interest on balance owed by Cheng)

However Cheng failed in paying up. It was decided to write off the debt.

The entries would be:

Dr. Accounts receivables $2,000

Dr. Interest on Accounts receivables with $15

Cr. Cheng's Account with $2,015

(Being debt owed by Cheng written off)

8 0
2 years ago
Tim is a single, cash-method taxpayer with an AGI of $50,000. In April of this year, Tim paid $740 with his state income tax ret
oksano4ka [1.4K]

Answer: $5960

Explanation:

Based on the analysis and the information provided in the question, the amount of taxes that Tim can deduct as an itemized deduction will be the addition of the Tim's state income tax return for the previous year, the state tax that was held during the year and the estimated state tax payment. This will be:

= $740 + $4200 + $1020

= $5960

Therefore, the amount of taxes that Tim can deduct as an itemized deduction will be $5960.

3 0
3 years ago
Problem:Water flows from a bathroom tap at a rate of 2 gallons every 6 seconds. Questions At this rate,how many minutes will it
katrin2010 [14]

Answer:

4 minutes.

Explanation:

The rate of flow from the tap is 2 gallons every six second

which comes out to be 1 gallons per 3 seconds.

so for 80 gallons we can simply

3  * 80 = 240 which is 240 seconds.

Thus it would take 4 minutes to fill up the 80 gallon tub.

4 0
3 years ago
Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost
Svetlanka [38]

Answer:

$500

Explanation:

The average cost per seat will be the total cost per plane divided by the seating capacity.

Therefore, the average cost of $50,000 divide by 100 seats

=$50,000/50 seats

=$500

3 0
3 years ago
What is the first step in developing a promotional campaign?
kotykmax [81]
You're First step is promotional message it reaches your intended and targeted audience. plus you're message is understood by your audience and you're message also works for the recipients, and they soon take immediate action.

Hope This Helps!!!
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3 years ago
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