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A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%. A bond issued by Ford d

SVETLANKA909090 [29]

Answer:

d. 0.8% and 1.3%.

Explanation:

The default risk premiums on the bonds issued by Shell = 6.5% - 5.7% = 0.8%

The default risk premiums on the bonds issued by Ford = 7.5% - 6.2% = 1.3%

Hence, the default risk premium issued by Shell and Ford respectively are 0.8% and 1.3%

7 0

3 years ago

A firm has a fixed production cost of $1 comma 000 and a constant marginal cost of production of $100 per unit produced. What

Semenov [28]

Answer:

option (D) TC = $1,000 + $100q

Explanation:

Data provided in the question:

Fixed cost of production = $1,000

Marginal cost of production = $100 per unit produced

Now,

let the total number of quantities produced be 'q'

also,

the total cost is given as:

⇒ Total cost, TC = Total fixed cost + Total marginal cost

or

⇒ TC = $1,000 + ( $100 × q )

or

⇒ TC = $1,000 + $100q

Hence,

The correct answer is option (D) TC = $1,000 + $100q

7 0

3 years ago

Below is a list of activities for Purple Cow Incorporated. Required: For each activity, indicate the impact on the accounting eq

myrzilka [38]

Answer:

Assets = Liabilities + Stockholders' Equity

1. 1,600 0 1600

2. -400 0 -400

3. 0 0 0

4. -100 0 -100

5. -400 0 -400

6. 1000 0 0

-1000

7. 7000 7000 0

8. 0 200 -200

9. 10000 0 10000

10. -500 0 -500

Totals 17200 7200 10000

5 0

3 years ago

A large grocery store would like to study how consumers respond to signage in grocery store aisles. They recruit several volunte

Brums [2.3K]

Answer:

Place more "Buy One, Get One Free" signage throughout the store to spur purchases

Explanation:

Neuromarketing is a new field of marketing which uses medical technologies such as functional Magnetic Resonance Imaging (fMRI) to study the brain’s responses to marketing stimuli. Researchers use the fMRI to measure changes in activity in parts of the brain and to learn why consumers make the decisions they do, and what part of the brain is telling them to do it.

Marketing analysts will use neuromarketing to better measure a consumer’s preference, as the verbal response given to the question “Do you like this product?” may not always be the true answer. This knowledge will help marketers create products and services designed more effectively and marketing campaigns focused more on the brain’s response.

Neuromarketing will tell the marketer what the consumer reacts to, whether it was the color of the packaging, the sound the box makes when shaken, or the idea that they will have something their co-consumers do not.

4 0

3 years ago

If Wild Widgets, Inc., were an all-equity company, it would have a beta of 1.05. The company has a target debt-equity ratio of .

Serga [27]

Answer:

WACC is 10.18%

Explanation:

In order to compute the WACC for Wild Widgets,Inc,we need first of all ascertain the cost of debt kd and the cost of equity ke.

The cost of debt is the same the yield to maturity where yield to maturity can be computed using rate formula in excel:

=rate(nper,pmt,-pv,fv)

nper is the number of years before maturity which is 30

pmt is the coupon payable on the bond,6.1%*$1000=$61

pv is the current price of the bond at $1,055

fv is the face value of the bond at $1,000

=rate(30,61,-1055,1000)

rate=5.71%

pretax cost of debt is 5.71%

In order to calculate levered cost of equity,we need to re-lever the beta value of 1.05 using the below formula:

Levered β = Unlevered β ×(1 + [(D/E) × (1−t) )

Unlevered β=1.05

D/E=0.55

tax=tax =24%=0.24

Levered β=1.05*(1+(0.55)*(1-0.24)

=1.05*(1+(0.55)*(0.76)

=1.49

Levered cost of equity is then computed using the levered beta of 1.49

Ke=risk free rate+Levered beta*(market return-risk-free rate)

risk free rate is 3.2%

market return is 10%

ke=3.2%+1.49(10%-3.2%)

ke=13.33%

WACC=Ke*(E/V)+Kd*(D/V)*(1-t)

Ke is 13.33%

kd is 5.71%

D/E=0.55=0.55/1 which means that debt has 0.55 equity has 1

D/V=D/E+V=0.55/1+0.55=0.35

E/V=E/E+V=1/(1+0.55)=0.65

WACC=13.33%*0.65+5.71%*(0.35)*(1-0.24)

=13.33%*0.65+5.71%*(0.35)*(0.76)

=0.086645 +0.0151886

=10.18%

6 0

3 years ago