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gizmo_the_mogwai [7]
4 years ago
12

Piedmont Hotels is an all-equity company. Its stock has a beta of .94. The market risk premium is 7.5 percent and the risk-free

rate is 3.3 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 2.5 percent to the project's discount rate. What should the firm set as the required rate of return for the project
Business
1 answer:
Liula [17]4 years ago
8 0

Answer:

Required rate of return for the project = 9.7%

Explanation:

The risk-adjusted discount factor = cost of equity + the adjustment

Cost of equity can be calculated using the capital asset pricing model CAPM

Using the CAPM , the rate of return on equity can be determined as follows:

E(r)= Rf +β(Rm-Rf)

E(r) =? , Rf- 3.3%, Rm- 7.5%, β- 0.94

Cost of equity = Rf + β (Rm -Rf)

Cost of equity = 3.3% + 0.94×(7.5-3.3)= 7.248

The risk-adjusted discount factor=  7.248 + 2.5= 9.748

Required rate of return for the project = 9.7%

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When reactions to a small scale marketing effort are used to predict reactions in a larger​ area, the testing method​ is:The alt
Anton [14]

Answer:

1. Test market

2. Buzz or Word of Mouth Marketing

Explanation:

1. Test market is made up of a particular group of people who are used in checking feasibility of a product before bringing it out to the larger or general market. They are used to check how the general market would perceive the product once release. It is used in measuring consumer's response to a new product before introducing it to the larger market.

2. Buzz marketing involves or rather refers to the situation whereby a satisfied consumer/customer passes along information pertaining to a particular product to another consumer/customer. It is a situation whereby a person recommends the use of a particular products to another customer. It involves using word of mouth marketing to works in one's favour.

8 0
4 years ago
Suppose that over the past year, the nominal interest rate was 5 percent, the CPI was 150.3 at the end of the year, and the CPI
makvit [3.9K]

Answer:

The correct answer is option c.

Explanation:

The nominal interest rate was 5 percent.

The CPI was 150.3 at the end of the year, and the CPI was 144.2 at the beginning of the year.

The 5% nominal interest rate means that the dollar value of savings increased at 5%.

Inflation rate

= \frac{(150.3 - 144.2)}{144.2}

= 0.0423 or 4.2%

The real interest rate

= Nominal interest rate - rate of inflation

= 5 - 4.2

= 0.8%

The real interest rate of 0.8% indicates that the purchasing power of savings increased at 0.8%.

3 0
3 years ago
Supporters of rent control say that it _____ the price of renting an apartment. raises lowers does not change
denis23 [38]

Answer:

The answer is lowers.

Explanation:

Supporters of rent control say that it <u>LOWERS</u> the price of renting an apartment.

Rent control is an administration program that puts a limit on the sum that a landowner can charge for renting a home or for renewing lease  

Rent control laws are typically established by regions and the subtleties differ broadly. All are planned to continue living costs reasonable for lower-salary occupants.

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6 0
3 years ago
Given the following data, calculate the total product cost per unit under variable costing. Direct labor $ 3.50 per unit Direct
labwork [276]

Answer:

$7.05

Explanation:

Given that

Direct labor = $3.50 per unit

Direct material = $1.25 per unit

Variable overhead = $41,400

Total fixed overhead = $150,000

Produced units = 18,000

The computation of total product cost per unit under variable costing is shown below:-

Total Variable overhead = Variable overhead ÷ Produced units

= $41,400 ÷ $18,000

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Total product cost per unit = Direct labor + Direct material + Total variable overhead

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= $7.05

3 0
3 years ago
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