Answer:
$90
Explanation:
Hollister has an offer of 10% savings for every purchase.
Jason buys clothes for $100. His savings will be 10% of $100
=10/100 x100
=0.1 x 100
=$10
Jason will pay
=$100 - $10
=$90
Jason will pay $90
Answer:
The options are given below:
A. Firm X
B. Firm Y
C. Same variability of operating profits
D. It would depend on tax effect on taxable income
The correct option is B. Firm Y
Explanation:
This is because firm Y has a higher operating leverage than firm X.
<u>Operating Leverage</u> refers to a cost-accounting formula that measures the degree to which a firm can increase operating income by increasing revenue. Operating leverage actually boils down to the analysis of fixed costs and variable costs, and it is highest in companies that have a high fixed operating costs in comparison with variable operating costs. What this means is that this kind of company makes use of more fixed assets. On the other hand, operating leverage is lowest in companies that have a low fixed operating costs when compared with variable operating costs.
Companies with high operating leverage are capable of making more money from each additional sale if they do not have to incur more costs to produce more sales.
Therefore, from the scenario given above, we can conclude that firm Y has a higher operating leverage than firm X, because firm X has lower fixed costs than firm Y, and a higher variable cost than firm Y as well. Hence, firm Y has the potential to make more operating profits from its business activities.
Answer:
30.92%
Explanation:
You find the answer by calculating the cost of equity using two methods; Dividend discount model and CAPM
<u>Dividend discount model;</u>
cost of equity; r = (D1/P0) +g
whereby, D1 = next year's dividend = 3.00
P0= current price = 13.65
g = dividend growth rate = 11% or 0.11 as a decimal
r = (3/13.65) + 0.11
r = 0.2198 + 0.11
r= 0.3298 or 32.98%
<u>Using CAPM;</u>
r = risk free + beta (Market risk premium)
r = 0.049 + (2.8 * 0.0856)
r = 0.049 + 0.2397
r = 0.2887 or 28.87%
Next, find the average of the two cost of equities;
=(32.98% + 28.87% )/2
= 30.92%
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