Answer:
a) The Beta of market portfolio of is always 1, hence the expected return of market portfolio will be 10%
Expected return = Rf+Beta(Rm-Rf)
=4%+1*(10%-4%)= 10%
b) Expected return of zero beta stock will be risk free return = 4%
Expected return = Rf+Beta(Rm-Rf)
=4%+0*(10%-4%)= 4%
C-1) Fair rate of return = 1%
Working:-
The expected return by SML of stock with Beta= -0.5
= 4%+(-0.5)*(10%-4%) =1%
C-2) Expected rate of return, using the expected price and dividend for next year
Ans:- Expected rate of return = 16%
Working:-
Expected rate of return
=(Price of share next year +dividend)/current price-1
=(78+9-75)/75 -1
=16%
C-3) Stock is Under priced
Reason:- The expected return(16%) on stock is higher than the fair rate of return (1%) hence the stock must be under-priced.
Answer:
Although consumer and producer surplus changes are the same under quotas and tariffs, tariffs are preferable because the government can redistribute the tariff revenue to offset most of the deadweight loss.
Explanation:
The answer is: competition and consumer trends
Competition would most likely reduce a company's market share since some consumers are bound to prefer another company's product whether due to their prices, quality, or marketing strategy. Consumers trends affect the type of products that are popular in the market.
To address both of this issue, creating specialty sodas can be a perfect strategy. Since it differentiate hayso's product with other competitors and the differentiation could be designed to target current trend.
I would say the subsidies for corn-based sugar will result in more of that sugar being produced and therefore sales should increase and the government should benefit by more tax revenue in the long run to offset the cost of the subsidies.
Answer: C : They will need to subtract a partial year of depreciation from the book value of the second truck but not the first truck.
Explanation:
When disposing of fixed assets such as vehicles, depreciation has to be charged on them to see their Net Book Value.
Companies usually depreciate their vehicles on a yearly basis in accordance with the end of their fiscal year. This company therefore most likely depreciates on December 31.
The first truck is sold 2 days after this Depreciation so there is no need to add more depreciation to it.
However the second truck on the other hand was sold 6 months later. Depreciation needs to charged on this substantial period but since it was not for the full year, a partial one needs to be charged.