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kozerog [31]
3 years ago
14

The Market Outlet has a beta of 1.38 and a cost of equity of 14.945 percent. The risk-free rate of return is 4.25 percent. What

discount rate should the firm assign to a new project that has a beta of 1.25?
Business
1 answer:
evablogger [386]3 years ago
7 0

Answer:

The discount rate assign to a new project with a Beta of 1.25 is 13.94%

Explanation:

The applicable formula is the Capital Asset Pricing Model formula of Miller and Modgliani  quoted below:

Ke = Rf + (Market risk premium x Beta)

Currently Ke=14.945%

Beta =1.38

Risk free rate of return (Rf) is 4.25%

Market risk premium is the unknown

14.945%=4.25%+(Market Risk Premium)*1.38

14.945%-4.25%=Market Risk Premium*1.38

10.70% =Market Risk Premium*1.38

10.70%/1.38=Market Risk Premium

Market Risk Premium =7.75%

However, the new project cost of equity has to be determined due to having a different Beta factor of 1.25(a different risk appetite)

Using the above formula, we have

Ke=4.25%+(7.75% *1.25)

Ke =13.94%

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Explanation:

Goodwill is the excess of purchase price consideration over the fair value of net assets of the business acquired.

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The net assets is the fair value of assets minus the fair value of the liabilities.

Purchase price consideration is $97,109

Net assets =$65,893+$9,736-$28,686=$ 46,943.00  

Goodwill=$97,109-$46,943.00  =$ 50,166.00  

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If national pride in the local capability to make a complex product is the objective of government policy, the best policy strat
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It is always the aim of the government that people take pride with the things that the locals in their land are able to produced. If this is the main aim of the government then, it should be a policy that one should buy the local products first. In line with this, the government may limit the amount of imported goods reaching their area as these imported good may jeopardized the aim to take pride in the local ones. 
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3 years ago
On January​ 1, 2024, Tyson Manufacturing Company purchased a machine for $41,100,000. ​Tyson's management expects to use the mac
denis23 [38]

Answer:

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Explanation:

Giving the following information:

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<u>To calculate the depreciation expense for 2024, we need to use the following formula:</u>

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7 0
3 years ago
Master Production Scheduling is a process that brings all the demand and supply plans for the business (sales, marketing, develo
kow [346]

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False

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3 years ago
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mash [69]

Answer:  Po = D1/Ke + g

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   $34.75 -0.039 = D1/0.104

                $34.711 = D1/0.104

                        D1  = 34.711 x 0.104

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Explanation: In this question. there is need to apply the formula for determining the current market price of a common stock. The current market price of a common stock is a function of next dividend capitalised at the appropriate cost of equity plus growth rate. in addition, we need to make the next dividend the subject of the formula.

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2 years ago
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