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Zinaida [17]
3 years ago
15

Tidewater Fishing has a current beta of 1.16. The market risk premium is 6.8 percent and the risk-free rate of return is 2.9 per

cent. By how much will the cost of equity increase if the company expands its operations such that the company beta rises to 1.18?
Business
1 answer:
netineya [11]3 years ago
7 0

Answer:

increase in cost of equity Ke = 0.14%

Explanation:

given data

current beta = 1.16

market risk premium = 6.8 percent

risk-free rate of return = 2.9 percent

beta rises = 1.18

solution

we get cost of equity when beta β is 1.16

cost of equity Ke = Rf + β ( Rm -Rf ) ................1

cost of equity Ke = 2.9 % + 1.16 ( 6.8% )

cost of equity Ke = 10.788 %

and

cost of equity when beta is 1.18

cost of equity Ke = 2.9 % + 1.18 ( 6.8 % )

cost of equity Ke = 10.924 %

so that

increase in cost of equity Ke = 10.924 % - 10.788 %

so increase in cost of equity Ke = 0.136

increase in cost of equity Ke = 0.14%

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2 years ago
Which inventory costing method results in the lowest net income during a period of rising inventory​ costs?.
scoray [572]

Due to the greatest cost of goods sold, the LIFO (Last In Last Out) technique displays the lowest net profitability. Compared to the other techniques of inventory valuation, the cost of goods sold for the LIFO approach is the greatest.

<h3>Which technique of inventory valuation will result in the lowest net profit?</h3>

The application of LIFO will produce the lowest net income and the greatest estimated cost of goods sold among the three options during periods of inflation.

<h3>Which method of inventory has the lowest income tax rate?</h3>

LIFO is the inventory cost flow method that yields the lowest income tax liability. A form of inventory cost flow mechanism called last-in-first-out (LIFO) operates under the presumption that the last item acquired will be the first item to be sold.

<h3>In an era of inflation, which inventory method results in the lowest income tax?</h3>

Due to increasing COGS, LIFO leads to reduced net income (and taxes). However, under LIFO during inflation, there are fewer inventory write-downs. Results from average cost are in the middle of FIFO and LIFO.

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7 0
1 year ago
The theory of ____________ states that a nation should produce and sell goods to other countries that it produces most efficient
nikitadnepr [17]

comparative advantage theory is the answer

4 0
3 years ago
Brian is a manager at a clothing store. He spends most of his time in the store with his employees, making sure they work their
Sophie [7]

Answer:

First line manager

Explanation:

First line managers are the lowest forms of managers in an organizational structure. They are the managers that deals with employees directly. They operate their departments by assigning work to the employees and monitoring their actions. In this case, the activities of Brian which included making sure they work their scheduled hours, watching them interact with customers and so on indicates that he is a First-Level Manager.

8 0
3 years ago
On January 1, Year 1, Price Co. issued $190,000 of five-year, 6 percent bonds at 96½. Interest is payable annually on December 3
Tasya [4]

Answer:

a) Cash received = $183,350

b) Interest expense = $12,730

c) Carrying value = $186,010

Explanation:

As per the data given in the question,

a) Face value of bond = $190,000

Issued at =0.965

Cash received = $190,000 × 0.965

= $183,350

b) Discount on bonds payable = $190,000 - $183,350

=$6,650

Annual amortization of discount on bonds payable =$6,650÷5

= $1,330

Cash interest = $190,000×0.60

= $11,400

Interest expenses = $11,400+$1,330

= $12,730

c)

carrying value = $183,350 + ($1,330 × 2)

= $186,010

6 0
3 years ago
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