Answer:
The market price of the security is $31.81
Explanation:
In order to calculate the market price of the security if its correlation coefficient with the market portfolio doubles we would have to calculate first the following:
First, calculate the dividend expected after one year with the following formula:
D=P*E(ri)
D=$50*0.14
D=$7
Next, we would have to calculate the beta of the security using the CAAPM Equation:
βi= E(ri)-rf/E(rm)-rf
=0.14-0.06/0.085
=0.9412
Next, we have to calculate the new beta due to the change in the correlation coefficient with the following formula:
β=correlation coefficient/σm*σs
=2*0.941
=1.882
Next, Calculate the new expected return as follows:
E(ri)=rf+βi(E(rm)-rf)
=0.06+(1.882)(0.085)
=0.22
Finally we calculate the new piece of the security as follows:
P=D/E(ri)
=$7/0.22
=$31.81
The market price of the security is $31.81
Options:
A. $18,500,000
B. $19,000,000
C. $19,500,000
D. $20,000,000
E. $20,500,000
Answer: C. $19,500,000.
Explanation:MVA(MARKET VALUE ADDED) is a measurement that is used to describe the difference between the market value to a company and the capital contributed by both the shareholders and the bondholders.
WHEN THE MARKET VALUE ADDED IS HIGH IT SIGNIFIES THAT THE COMPANY IS GENERATING ENOUGH MONEY TO COVER THE COST OF CAPITAL.
MVA= (market value-stockholders contribution).
Market value =$39.5*1000000shares
= $39,500,000
MVA= $39,500,000-$20,000000
MVA=$19,500,000.
Answer:
38880
Explanation:
Budgeted sales -870 boxes
Each box requires 44 pounds of clay
Opening inventory of clay = 3900 pounds
Closing inventory of clay = 4500 pounds
Clay mix cost - $0.40
Labor rate = $12/hr
Monthly purchase = budgeted sales + closing inventory - opening inventory
(870*44) + 3900 - 4500
38280 +4500 - 3900 = 38,880
