Blossom Company purchased equipment for $303,200 on October 1, 2020. It is estimated that the equipment will have a useful life
of 8 years and a salvage value of $15,200. Estimated production is 45,000 units and estimated working hours are 20,000. During 2020, Blossom uses the equipment for 530 hours and the equipment produces 1,000 units. Compute depreciation expense under each of the following methods. Blossom is on a calendar-year basis ending December 31. (Round rate per hour and rate per unit to 2 decimal places, e.g. 5.35 and final answers to 0 decimal places, e.g. 45,892.)
1 answer:
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Answer:
The cost of capital according to CAPM method for Abe will be 12.46%
Their project will be evaluate with this rate.
Explanation:
It will use the CAPM to evaluate the project, as there is no debt, the WACC is not needed.
rf = risk free 0.035
rm = market rate
premium market = (market rate - risk free) = 0.08
beta(non diversifiable risk) 1.12
Ke 0.12460 = 12.46%