Answer:
Bill has $25,000 at-risk and he can also deduct $25,000 from his income due to the losses associated with his rental activity.
Explanation:
At risk amounts are the money that investors can lose due to a bad business decision or performance. The maximum amount that an investor can deduct is equal to the at-risk amount that he/she has invested.
Bill's at-risk $25,000 are equal to the money he spent on house repairs.
Answer:
B. Able to bake delicious pies
Explanation:
All the other choices are stuff that you are born with but making a pie is a learned skill. You don't just come out of the womb cooking delicious pie!
Answer:
B) Cost of equity capital
Explanation:
Dividend discount model is used to find the Price of a given stock by calculating the present value of expected future dividends.
The dividend discount formula for finding price(assuming zero growth rate);
P0 = D1/r
The rate; r is the discount rate which is the cost of equity since dividends are paid on equity capital.
Weighted average cost of capital (WACC) is used to discount free cashflows of potential projects.
Answer: $8,600
Explanation:
Implicit cost is also known as the opportunity cost which means that it is the benefit of the next best alternative that was foregone when the current decision was made.
The implicit cost here is therefore:
The $8,000 that Charles could have been making as a lifeguard.
The interest per year he could have been earning on the $5,000 he used to buy mowing equipment.
The depreciation on the mowing equipment because depreciation is not an explicit cost but an implicit one.
= 8,000 + (2% * 5,000) + (10% * 5,000)
= 8,000 + 100 + 500
= $8,600