The large investment the company made in the failed project most likely was made by a manager who did not fully understand "Sunk Costs".
<h3>What is Sunk Cost?</h3>
An price or investment that has already been made and cannot be recovered is referred to as a sunk cost.
Types of sunk cost are -
- Investment in advertising. This money is lost if you advertise a new product; it cannot be recovered.
- Investigation into a new product.
- Labour expenses.
- New software system installation and operational procedures.
- Loss of relationships in business and reputation.
Therefore, Sunk expenses are unrelated to any particular occurrence and shouldn't be taken into account while choosing an investment or project.
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Answer:
A. an overstatement of net income and an understatement of liabilities.
Explanation:
Answer: Option (A) is correct.
Explanation:
Correct Option: Normal profits because economic profits will attract new firms and there are no entry restrictions.
In a monopolistically competitive market, firms will earn an economic profit in the short run, so new firms attracted with these profits and decided to enter into the market in the long run.
There is no barriers on entry and exit of the firms in the monopolistically competitive market. When new firms enters into the market, as a result supply of differentiated products increases.
This causes the firm's market demand curve to shift leftwards. It will continue shifting to the left in the firm market demand curve till the point where it is nearly tangent to the average total cost curve.
At this point, firms earns zero normal profit and can earn normal profits in the long run same as a perfectly competitive firm.
Answer:
$31.82
Explanation:
market price $50
expected rate of return /Re) = 14%
Div = $50 x 14% = $7
risk free rate (Rf) = 6%
market premium (Rm - Rf) = 8.5%
beta = ?
14% = 6% + (beta x 8.5%)
beta x 8.5% = 14% - 6% = 8%
beta = 8% / 8.5 = 0.941
if beta doubles to 1.882, then Re will be:
Re = 6% + (1.882 x 8.5%) = 22%
new market price of the stocks = $7 / 22% = $31.818 = $31.82
