Answer:
Risk Premium is 10%
Explanation:
Government treasuries represent risk free rate of return.
[tex]Risk Premium=R_{m}-R_{f}/tex] ,
where, [tex]R_{f} = Risk\ Free\ Rate\ Of\ Return/[tex]
[tex]R_{m} = Market\ Rate\ Of\ Return/[tex]
Risk Premium = 15 - 5 = 10%
Risk Premium is defined as return earned on market portfolio in excess of rate of return earned on risk free assets such as government treasury bonds.
So, Risk Premium refers to the compensation an investor expects to earn for assuming higher risk by investing in market portfolio instead of investing his money in risk free class of assets.
Answer:
First project
Explanation:
The 2 options/ project been considered:
1. Buying 10% of shares in a publicly traded american company that owns five power generation units in Pakistan
2. To be partner with equal share with one private company in building a new power generation unit in Pakistan
The first option/project would have a higher required return because:
<em>- This company is already settled in the country having five power generation units in Pakistan. All these units are running and making profit.</em>
<em>- Investment Option 2 is high riskier as we do not know the details of the new company and there are so many unforeseen circumstances surrounding establishing such project in the company. It will also take time to establish in order to start make it profitable.</em>
Answer:
The store manager must decide to buy 3
Explanation:
Given that:
- The first: $200 a year
- The second $150
- The third $75,
- The fourth $50
- Interest rate is 12 percent
- Investment: $500
As we know that the rate of return will be: Income / Investment
So the rate of return of:
- The first: $200 / $500 = 0.4 = 40%
- The second $150 / $500 = 0,3 = 30%
- The third $75 / $500 = 0.15 = 15%
- The fourth $50 / $500 = 0.1 = 10%
Only three rug cleaners have the rate of return greater than the interest rate so the store manager must decide to buy 3
Quick ratio is 1.47.
Company A uses the FIFO method to account for inventory and Company B uses the LIFO method. The quick ratio is an indicator of a company’s short-term liquidity position and measures a company’s ability to meet its short-term obligations with its most liquid assets.
Gross Profit 72000 67000
Operating expenses and interest expense 56000 53000,
Pretax Income 2200014000
Income Tax 3000 4000
Net Income 14000 10000
Balance sheet Year? Year
cash 4000 7000
Accounts Receive ab 114000 18000
Taventory 40000 34000,
Property & Equipment 45000 36000
Total Assets 302000 97000
Current Liabilities ‘i6000 4.7000
Long term Liabilities 5000 45000
Common stock 30000 30000
Retained Earnings 1120005000
Total Liabilities & Stock holders equity 10300037000,
L. Current Ratio = Current Assets / Current Liabilities
Year? Year
Current Ratio 36347
2.Quick Ratio
‘Current Assets - Inventory / Current Liabilities
Year? Year
Quick Ratio is 1.47
2.Profit Margin = Net profit /Sales
Year? Year
Profit Margin 737% 5.99%
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