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Lana71 [14]
3 years ago
8

Consider an investment with the returns over 4 years as shown​here:

Business
2 answers:
xeze [42]3 years ago
8 0

Answer:

Explanation:

Assume the initial invest at the beginning is $100.

The investment at end of year 4 is:

100 x 1.16 x 1.11 x 1.1 x 1.1 = 155.80

a) CAGR over the 4 years = (155.8 / 100 ) ^ (1/4) = 11.72%

b) Average annual return over 4 years = (16% +11% + 10% +10%) /4 = 11.75%

c) Since the returns over the 4 year period are not much volatile, average annual return is a better measure.

If the investment's returns are independent and identically distributed, Average annual return will be the better measure because there is no correlation between returns over the years and thus there is no point to take into consideration the compounding effect by using CAGR.

Vsevolod [243]3 years ago
3 0

Answer:

A) -0.111

B) 11.75%

C) Take the first year measures for next year investment, as it gave the highest returns.

Explanation:

A) The compound annual growth rate is calculated as

(EB÷BB)^1/n - 1

EB is the ending balance

BB is the beginning balance

n is the number of years

Therefore;

(10% ÷ 16%)^1/4 - 1

(0.625)^1/4 - 1 = (0.625)^0.25 - 1

0.88914 - 1 = -0.111

Because the growth rate is negative, that means the investment did not grow, but rather the growth dropped with -0.111

B) The average annual return for this investment is to calculate the mean value for the of the annual returns

(16% + 11% + 10% + 10%) ÷ 4 = 11.75%

That means the average returns for 4 years is 11.75%

C) The better measure for the next year investment, is the measures that was taken in the first year, as it gave the investment the highest return since 4 years ago.

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What is the weighted average cost of capital (WACC) for ABC Limited which has the following capital structure? $5m of equity wit
katrin2010 [14]

The weighted average cost of capital (WACC) for ABC Limited is 12.63%

The weighted average cost of capital(WACC) of a firm is the average cost of finance incurred by the firm on all its sources of finance.

It is determined as the sum of the cost of each source of finance multiplied by their respective weights in the firm's capital structure.

By weights, I mean the percentage of funding each source contributes to the total finance available at the firm's disposal.

WACC=(weight of equity*cost of equity)+(weight of mezzanine finance*cost of mezzanine finance)+(weight of debt*cost of debt)

weight of equity=equity finance/total finance

cost of equity=15%

weight of mezzanine finance=mezzanine finance/total finance

cost of mezzanine finance=9.5%

weight of debt of finance=debt finance/total finance

total finance=$5m+$2m+$1m

total finance=$8m

WACC=($5/$8*15%)+($2/$8*9.5%)+($1/$8*7%)

WACC=12.63%

Find further guidance on weighted average cost of capital's computation in the link below:

brainly.com/question/25566972

#SPJ1

7 0
2 years ago
The Value of a Bond is tied to the Dividend rate.<br><br> True or false
PilotLPTM [1.2K]

<u>Answer:</u> False. The Value of a Bond is not related to the Dividend rate.

<u>Explanation:</u>

Bond rates are inversely related with the interest rates in the market and not dividend rates. Bonds yield interest for the investment and not dividends. Dividends are paid for shares. Dividend rates affects the share price and not Bond value in the market.

The interest rates of the Bonds can be fixed rates or fluctuating rates. It depends on the type of the security issued. As the interest rates are fluctuating then the risk for the investors increase.

7 0
3 years ago
Kieso Company borrowed $740,000 for three months. The annual interest rate on the loan was 9%. Kieso's fiscal year ends on Decem
Lunna [17]

Answer:

Last Fiscal Year:

Interest Expense = $5550

Current Fiscal Year:

Interest Expense = $11100

Explanation:

According to the accrual basis of accounting, the expenses and revenues relating to a certain period should be recorded in that particular period whether of not they have been received. The fiscal year of Kieso ends on 31 December and as the loan was taken one month prior to the start of the current fiscal year, it was taken at the start of December of last fiscal year.

This means that the interest expense on loan relating to last December will be charged to the last fiscal year and the interest expense relating to January and February will be charged to the current fiscal year. The interest expense amount will be calculated as follows,

Last Fiscal Year = 740000 * 9% * 1/12  => $5550

Current Fiscal Year = 740000 * 9% * 2/12  => $11100

3 0
2 years ago
Can the government tell its citizens what they can and cannot do as long as their actions do not impinge on the rights of other
densk [106]
If they are terrorist or had a very criminal background
5 0
3 years ago
Total stockholders' equity includes $50,000 of common stock with a stated value of $0.50, and 5,000 shares of treasury stock wit
IrinaK [193]

Answer:

Common stock outstanding = $50,000/$0.5 = 100,000 shares

Treasury stock outstanding                              = 5,000 shares

Total shares outstanding                                    105,000 shares

Explanation:

Total shares outstanding is the aggregate of common stock outstanding and treasury stock outstanding. Common stock outstanding is derived by dividing the total value of common stock by par value of common stock.

6 0
3 years ago
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