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Radda [10]
3 years ago
8

Ethier Enterprise has an unlevered beta of 1. Ethier is financed with 55% debt and has a levered beta of 1.1. If the risk free r

ate is 6% and the market risk premium is 4%, how much is the additional premium that Ethier's shareholders require to be compensated for financial risk? Round your answer to two decimal places.
Business
1 answer:
tresset_1 [31]3 years ago
6 0

Answer:

The correct answer is 0.4%.

Explanation:

According to the scenario, the computation for the given data are as follows:

If no debt, then required return can be calculated by using following formula:

Required return ( no debt) = Risk free rate + Unlevered Beta × Market risk premium

= 6% + 1 × 4%

= 0.06 + 0.04

= 0.10 or 10%

If debt, then required return can be calculated by using following formula:

Required return ( with debt) = Risk free rate + levered Beta × Market risk premium

= 6% + 1.1 × 4%

= 0.06 + 0.044

= 0.104 or 10.4%

So, extra premium required = 10.4% - 10% = 0.4%

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Sam buys fuel for his construction vehicles from the local distributer. He uses 8,500 gallons a month. The local distributor cha
3241004551 [841]

Answer:

He should order 681.66 gallons to minimize the cost, but he have a 500 gallon tank he can fill, so he will order 500 gallons every time, to minimize the cost.

Explanation:

According to the given data we have the following:

h = handling cost per unit = $ 9

S = Ordering cost per order = $20.5

He uses 8,500 gallons a month, therefore, the annual demand D= 8,500*12 = 102,000 gallons .

Therefore, the optimal ordering quantity would be= [ (2*D*S) / h ]1/2

                                                                                   =681.66 units

He should order 681.66 gallons to minimize the cost, but he have a 500 gallon tank he can fill, so he will order 500 gallons every time, to minimize the cost.

3 0
2 years ago
Universal Travel, Inc. borrowed $500,000 on November 1, 2021, and signed a twelve-month note bearing interest at 6%. Principal a
marusya05 [52]

Answer:

The answer is D.

Explanation:

Interest expense is the amount of interest to be paid on borrowed money(bills, notes or bonds). Interest expense can be found on income statement. Income expense reduces the net income and profitability of the company. It is used to determine the solvency of a company.

In the question, Universal borrowed for 12 months from November 1, 2021 and the note matures on October 31, 2022.

For 2021, it will recognize 2 months(November 1, 2021 - December 31, 2021).

For 2022, it will recognize 10 months(January 1, 2022 - October 31, 2022).

Therefore, for 2022, Universal Travel, Inc. will recognize:

$500,000 x 6% x (10 months÷12 months)

= $25,000

5 0
3 years ago
What will happen in the bond market if the government imposes a limit on the amount of daily transactions? Which characteristic
arlik [135]

In the bond market if the government imposes a limit on the amount of daily transactions, liquidity of bonds relative to other assets will​ decrease, increasing the interest rate and lowering​ bond's prices.

In the bond market various debt instruments are bought and sold by a variety of entities. In the bond market, corporations and governments issue bonds in order to raise debt capital to fund operations or seek growth opportunities.

If the government imposes a limit on the amount of daily transactions in the bond market, then bonds will become less liquid with respect to alternative assets, by also lowering​ bond's prices and increasing the interest rate.

Hence, bonds are issued by governments and corporations when they want to raise money.

To learn more about bond market here:

brainly.com/question/14314042

#SPJ4

8 0
1 year ago
A cruise ship with a mass of 1.00×107kg strikes a pier at a speed of 0.750 m/s. It comes to rest 6.00 m later, damaging the ship
pickupchik [31]

Answer: The required force = 4.7 x 105 N

Explanation:

Mass of the ship m = 1.00 x 107 Kg

Initial speed u = 0.750 m/s

Final speed v = 0 m/s

Average speed s =( 0.750 + 0) / 2 = 0.375 m/s

Time taken to bring the ship to rest t = \frac{distance}{speed}    

= \frac{6}{0.375}

= 16 s

Average force exerted on the pier F =\frac{m(v - u )}{t}

F  = \frac{1.00 x 107 ( 0 - 0.750 )}{16}

F  = - 4.7 x 105 N

Hence the required force = 4.7 x 105 N

7 0
3 years ago
Which of the following is not included in the manufacturing industry cluster?
makvit [3.9K]

where are the answer choses


5 0
2 years ago
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