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Nady [450]
3 years ago
15

A share of stock with a beta of 0.75 now sells for $50. Investors expect the stock to pay a year-end dividend of $2. The T-bill

rate is 4%, and the market risk premium is 7%. a. Suppose investors believe the stock will sell for $52 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do?
Business
1 answer:
Anna11 [10]3 years ago
7 0

Answer:

What the investors will do depends on whether the actual return will be higher, lower or the same as the required return (Opportunity cost of capital) .

The Actual return can be calculated using the Holding Period Return which is;

= (Earnings(Dividends) + (Ending Stock Price - Beginning Stock Price))/Beginning Stock Price

= (2 + (52 - 50))/50

= 4/50

= 8%

The Opportunity Cost of Capital can be calculated using CAPM.

= Risk Free Rate + beta(Market Premium)

= 4% + 0.75(7%)

= 9.25%

The Opportunity Cost of Capital is greater than the Actual Return from the stock so the stock is a bad buy.

Investors will not invest.

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Data collected by a company to solve a specific research problem is called _____________.
elena55 [62]

Answer:

Primary data

Explanation:

Primary data is information collected by a researcher from the field for the first time. The tools used to collect primary data are designed to address a particular problem. Consequently, the gathered information will be relevant to solving the problem at hand. Primary data is first-hand information and is collected using questionnaires, surveys, and interviews.

Secondary data is information that had been collected previously for other purposes but was found useful in another study.

8 0
3 years ago
Well Water Inc. wants to produce and sell a new flavored water. In order to penetrate the market, the product will have to sell
Setler [38]

Answer:

$0.40

Explanation:

Total Cost of Goods Sold = Sales revenue - Desired profit

Total Cost of Goods Sold = ($2*50,000) - $70,000

Total Cost of Goods Sold = $100,000 - $70,000

Total Cost of Goods Sold = $30,000

Target cost per bottle = Total cost of goods sold / Units sold

Target cost per bottle = $20,000/50,000

Target cost per bottle = $0.40

So, the target cost per bottle will be $0.40

7 0
3 years ago
Which of the following statements is CORRECT?
OleMash [197]

Answer:

d.

Explanation:

The relevant WACC can change depending on the amount of funds a firm raises during a given year. Moreover, the WACC at each level of funds raised is a weighted average of the marginal costs of each capital component, with the weights based on the firm's target capital structure.

The weighted average cost of capital is the rate that a company is expected to pay on average to all its security holders to finance its assets.

7 0
4 years ago
Samuel started a new job today and was invited to join some of his co-workers out for a drink after work. In an effort to win hi
Ilia_Sergeevich [38]

Answer:

Samuel is using <em>Ingratiation</em> impression management strategy.

Explanation:

What is Impression Management Strategies ?

<em>Impression management is a conscious or subconscious process in which people attempt to influence the perceptions of other people about a person, object or event by regulating and controlling information in social interaction. </em>

There are many different strategies we can use while trying to impact the views of others. The most common impression management strategies include ingratiation, intimidation, supplication, self-promotion and exemplification.

Ingratiation - <em>The term ingratiation refers to behaviors that a person illicitly enacts to make others like him or her or think well of his or her qualities as a person. ... A second strategy is do favors or to help or assist a person.</em>

6 0
3 years ago
Read 2 more answers
Francis, the plant manager, is interested in increasing the facility's productivity by utilizing MBO so that his managers and th
Mashcka [7]

Francis, the plant manager, is interested in increasing the facility's productivity by utilizing MBO so that his managers and their employees are more focused on objectives. This month Francis asked his managers to concentrate on the two first steps of MBO, which are to jointly set objectives with their employees and to have managers develop action plans

<h3><u>Explanation:</u></h3>

MBO refers to Management by Objectives. In this type of management system the managerial activities are integrated and are executed in a systematic manner. This is done for the management of the objectives of an organisation are managed both effectively and efficiently.

It focuses on both the organisation and the individual's objectives.In the given example, the aim of the plant manager is to increase the productivity of a Plant through MBO. Hence he can first jointly set objectives with the employees and assign managers to develop action plans.

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3 0
3 years ago
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