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
mafiozo [28]
3 years ago
11

Miller Stores has an overall beta of 1.38 and a cost of equity of 12.7 percent for the company overall. The firm is all-equity f

inanced. Division A within the firm has an estimated beta of 1.52 and is the riskiest of all of the company's operations. What is an appropriate cost of capital for Division A if the market risk premium is 7.4 percent? Multiple Choice 13.12 percent 13.74 percent 12.63 percent 12.77 percent 13.01 percent
Business
1 answer:
mojhsa [17]3 years ago
8 0

Answer:

MILLER STORES

Ke = Rf + β(Market risk premium)

12.7 = Rf + 1.38(7.4)

12.7 = Rf + 10.212

Rf = 12.7 - 10.212

Rf = 2.488%

DIVISION A

Ke = Rf + β(Risk premium)

Ke = 2.488  + 1.52(7.4)

Ke = 2.488 + 11.248

Ke = 13.74%

Explanation:

First and foremost, we need to calculate risk-free rate using the data relating to Miller Stores. In this case, the cost of equity, beta and market risk premium of Miller Stores were provided with the exception of risk-free rate. Then, we will make risk-free rate the subject of the formula.

We also need to calculate the cost of capital of division A, which is risk-free rate plus beta multiplied by the market risk-premium.

You might be interested in
Formula for average inventory ​
morpeh [17]

The average of inventory is the average amount of inventory available in stock for a specific period.


To calculate the average of inventory, take the current period inventory balance and add it to the prior period inventory balance. Divide the total by two to get the average inventory amount.
6 0
3 years ago
Name 3 factors that can contribute to increased output of goods and services in a country
galina1969 [7]
I would think money,supply or demand? 
6 0
3 years ago
If $1,000,000 of 9% bonds are issued at 102 3/4, the amount of cash received from the sale is
Marina86 [1]

Answer:

b.$1,027,500

Explanation:

First we need to find the number of bonds issued so we will divide 1,000,000 by 100 as we assume 100 is the face value. 1,000,000/100=10,000

Now we will multiply the number of bonds by the issue price in order to find the amount of cash received.

10,000*102.75=1,027,500

6 0
3 years ago
Both goods and services can be standardized for the mass market or customized to individual needs.
Kazeer [188]
The answer to this statement is True goods and services can be easily balanced and purchased at certain prices and if needed the prices will increase
7 0
3 years ago
Hilton hotels' use of customer information software to identify the most profitable customers to direct its services to is an ex
Ksju [112]
Find its target market.......
8 0
3 years ago
Other questions:
  • You have a maximum cost-per-click (max. cpc) bid of us$2 for a keyword. to determine the prospective impact of raising this bid
    6·1 answer
  • The minutes of the Safety Team's April meeting including a header with the meeting name and date. They also include an opening,
    5·2 answers
  • I need to know, which type of LLC/Corp I need to form, to trade stocks..
    7·1 answer
  • ____ focuses on using information about customers to create marketing strategies that develop and sustain desirable customer rel
    15·1 answer
  • Ayayai Corp. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,
    6·1 answer
  • An office building has $66,000 of net income and sold for $550,000. What was the rate of return? 12% 8.3% 10% 11.1%
    15·2 answers
  • Aquilera, Inc., has sales of $19.6 million, total assets of $14.6 million, and total debt of $5.4 million. The profit margin is
    11·1 answer
  • If you were charged $1152 in taxes on a $2560 purchase. What percent tax were you charged
    11·1 answer
  • Tamarisk, Inc. purchased a delivery truck for $29,200 on January 1, 2020. The truck has an expected salvage value of $2,200, and
    13·1 answer
  • Mary sells T-shirts in a stall at the shopping centre. When she charges £15 per T-shirt she does not sell anything, however she
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!