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artcher [175]
3 years ago
13

Vang Enterprises, which is debt-free and finances only with equity from retained earnings, is considering 7 equal-sized capital

budgeting projects. Its CFO hired you to assist in deciding whether none, some, or all of the projects should be accepted. You have the following information: rRF= 4.50%; RPM = 5.50%; and b = 0.93. The company adds or subtracts a specified percentage to the corporate WACC when it evaluates projects that have above- or below-average risk. Data on the 7 projects are shown below. If these are the only projects under consideration, how large should the capital budget be?
Project Risk Risk Factor Expected Return Cost (Millions)
1 Very low -2.00% 7.60% $25.00
2 Low -1.00% 9.15% $25.00
3 Average 0.00% 10.10% $25.00
4 High 1.00% 10.40% $25.00
5 Very high 2.00% 10.80% $25.00
6 Very high 2.00% 10.90% $25.00
7 Very high 2.00% 13.00% $25.00

a. $ 125
b. $ 100
c. $ 25
d. $50
e. $75
Business
1 answer:
kifflom [539]3 years ago
7 0

Answer:

E $75

Explanation:

Using CAMP we solve for the Cost of equity on each and determinate which project are worht to invest on it

A

Ke= r_f + \beta (r_m-r_f)

risk free = 0.045

rate premium market = (market rate - risk free) =  0.055

beta(non diversifiable risk) = 0.93

Ke= 0.045 + 0.93 (0.055)

Ke 0.09615 = 9.615%

A 9.615% - 2.00% =  7.615% As the return is 7.60% we should <em>reject</em>

B 9.615% - 1% = 8.615% return of 9.15% we should <u>Accept</u>

C return of 10.10% while Ke 9.615% <u>Accepted</u>

D 9.615% + 1% = 10.615% return of 10.40% <em>rejected</em>

E 9.615% + 2% = 11.615% against 10.80% yield <em>rejected</em>

F cost of 11.615% ith return of 10.90% <em>rejected</em>

G cost of 11.615% with return of 13.00% <u>Accepted</u>

We accept three projectthus, we require $75

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Wittaler [7]

Answer:

Explanation:

1) Employment

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2) Industry sector and human development

The mobilization and increase of physical inputs such as labor, material capital and natural resources (the discovery of new natural resources, the shift of existing labor and capital resources across sectors, etc.) in the short-term and long-term impact on economic growth in the manufacturing process. Due to technological progress and more intensive use of human capital in the manufacturing process, the impact of increased productivity on economic growth and development occurs mainly in the medium and long term. Experience of different countries' economic development is a sustainable and sustainable economic growth

It mainly focuses on the development and technological progress of human capital.

3) Development of the agricultural sector

It is a complement to activities that involve land (farming) and animal husbandry for the purpose of acquiring agricultural, plant and animal products. Adequate and high-quality agricultural production, which is one of the main sources of nutrition and income for the population, contributes to human development, with a positive impact on people's health and wellbeing.

4) Trade, Investment Environment and Private Sector Development

There is a significant and significant relationship between the liberalization of trade and the business environment and human development. Economic development practices show that countries liberalizing their foreign trade regime, improving their business environment and opening up to foreign investments will gradually achieve higher human capital potential in parallel with this process. The emergence of a strong human capital reserve, while ensuring the sustainability of economic growth, can also lead to the process of economic growth turning into economic development.

In other words, a favorable business environment will increase human capital investment in the country by increasing the demand for quality labor resources.

4 0
3 years ago
If you put up $43,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual cash flow be?
AysviL [449]

Answer:

The annual cash flow will be $4,500.

Explanation:

Use following formula to calculate Annual Cash flow from Annuity.

Present value of annuity = annual cash flow ( 1 - ( 1 / ( 1 + rate of interest )^time period ) ) / rate of interest

PVA = C ( 1 - ( 1 / ( 1 + r )^t ) ) / r

$43,000 = C ( 1 - ( 1 / ( 1 + 0.0625)^15 ) ) / 0.0625

$43,000 = C x 9.5555

C = $43,000 / 9.5555

C = $4,500

So, the annual cash flow will be $4,500.

5 0
3 years ago
Henriette offers financial counseling and management on a fee-only basis. She has found that different customers are willing to
Tju [1.3M]

Answer:

The correct answer is letter "C": how different customers perceive the value of her services.

Explanation:

Different consumers could value goods or services differently depending on what those products represent for them. <em>The higher the utility of the good or service, the more individuals will be willing to pay for it. </em>This situation could affect or benefit providers being this the reason why most of them have a <em>fixed price</em> on what they offer.

Thus, <em>the reason why some of Henriette's customers pay her different rates is that some of them find her services more valuable than others.</em>

8 0
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Assume that a company’s beginning-of-period price is $10 per common share, its dividends are $0.55 per share, and its end-of-per
kifflom [539]

Answer: 10.5%

Explanation:

The expected cost of equity capital is calculated by the formula;

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= (10.50 - 10 + 0.55) / 10

= 10.5%

8 0
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SVETLANKA909090 [29]

Answer:

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4 0
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