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AlekseyPX
3 years ago
5

Honest Abe’s is a chain of furniture retail stores. Integral Designs is a furniture maker and a supplier to Honest Abe’s. Honest

Abe’s has a beta of 1.38 as compared to Integral Designs' beta of 1.12. Both firms carry no debt, i.e., are 100% equity-financed. The risk-free rate of return is 3.5 percent and the market risk premium is 8 percent. What discount rate should Honest Abe's use if it considers a project that involves the manufacturing of furniture?
Business
1 answer:
guapka [62]3 years ago
8 0

Answer:

The  discount rate should Honest Abe's use if it considers a project that involves the manufacturing of furniture is 12.46%

Explanation:

In this question, w e use the Capital Asset Pricing model method, which is shown below:

Expected return = Risk-free rate of return + Beta × market risk premium

                           = 3.5% + 1.12 × 8%

                            = 3.5% + 8.96%

                            = 12.46%

In this we use the Integral design beta not the Honest Abe beta

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Answer:

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b).  The population: Adults ages 18 years or older in a certain country

c). The sample: 1003 adults

d). Descriptive statistics:

36% (362 individuals) think that 51 cents or more is wasted out of  every dollar that tax payers pay the goverment

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Confidence level= 90%

Explanation:

A). The research main objective is extracted from the reasearch question. If researchers question is how many cents out of a dollar that tax payers pay adults think are wasted then the objective is to know that information.

B). The population is not the same as sample, the sample is the representative portion of the population, in this case the population are adults in the country.

C).  the sample is 1003 adults from the country.

D.  Descriptive statistics are included in the question.

The margin of error is a statistic that expresses the amount of random sampling error in the results of a survey.

A confidence level refers to the percentage of all possible samples that can be expected to include the true population parameter given the sample.

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