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dimaraw [331]
3 years ago
13

"As a financial analyst, you are tasked with evaluating a capital budgeting project. You were instructed to use the IRR method a

nd you need to determine an appropriate hurdle rate. The risk-free rate is 4 percent and the expected market rate of return is 11 percent. Your company has a beta of 1.4 and the project that you are evaluating is considered to have risk equal to the average project that the company has accepted in the past. According to CAPM, the appropriate hurdle rate would be ______%. A. 13.8B. 7C. 15D. 4E. 1.4
Business
1 answer:
notsponge [240]3 years ago
8 0

Answer:

A. 13.8

Explanation:

In this question, we are applying the Capital Asset Pricing Model (CAPM) formula shown below

Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

= 4% + 1.4 × (11% - 4%)

= 4% + 1.4 × 7%

= 4% + 9.8%

= 13.8%

The Market rate of return - Risk-free rate of return) is also called as the market risk premium.

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2 years ago
1. To limit records displayed to those that match your criteria you apply a
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Answer:

Filter

Explanation:

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3 years ago
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3 years ago
Read 2 more answers
Which of the following is a characteristic of a current liability?
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Hey Friend.

A is the answer.

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4 0
3 years ago
The aggregate demand for good X is Q​ = 20 minus ​P, and the market price is P​ = $8. What is the maximum amount that consumers
bagirrra123 [75]

Answer:

so maximum amount that consumers are willing to pay for the quantity demanded at this​ price = $168

Explanation:

given data

Q​ = 20 - ​P

P​ = $8

to find out

maximum amount that consumers are willing to pay for the quantity demanded at this​ price

solution

we get here demand at current market price that is

Q = 20 - P

Q = 20 - 8

Q = 12

and Total expenditure incurred will be at at current market price will be

Total expenditure incurred  = Price × Quantity ..................1

Total expenditure incurred  = $8 × 12

Total expenditure incurred  = $96

and

we get price when Q = 0

Q = 20 - P  

P = 20

so now consumer surplus will be here as

consumer surplus = 0.5 × ( Price when(Q = 0) - Current market price) × Quantity ............................2

put her value we get

consumer surplus = 0.5 × ( 20 - 8 ) × 12

consumer surplus = $72

and

now we get maximum amount that is

maximum amount = Current expenditure + Consumer surplus  

maximum amount = $96 + $72

maximum amount = $168

so maximum amount that consumers are willing to pay for the quantity demanded at this​ price = $168

8 0
3 years ago
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