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vlabodo [156]
3 years ago
11

The risk premium for exposure to aluminum commodity prices is 4%, and the firm has a beta relative to aluminum commodity prices

of .6. The risk premium for exposure
to GDP changes is 6%, and the firm has a beta relative to GDP of 1.2. If the risk-free rate is 4%, what is the expected return on this stock?

A.
14.4 percent

B.
10.0 percent

C.
13.6 percent

D.
11.5 percent Please show work
Business
1 answer:
sp2606 [1]3 years ago
5 0

Answer:

C.  13.6 percent

Explanation:

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

Expected rate of return = Risk-free rate of return + Beta × risk-free rate of return + Beta × market risk premium

= 4% + 0.6 × 4% + 1.2 × 6%

=  4% + 2.4% + 7.2%

= 13.6%

The (Market rate of return - Risk-free rate of return)  is also known as market risk premium

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Landon is a senior manager for the firm Anderssen Inc. Because of his experience, he has been appointed to the board of EEC Inc.
Lapatulllka [165]

Answer:

Executive Director, Non Executive Director

Explanation:

Landon is a senior manager for the firm Anderssen Inc. Because of his experience, he has been appointed to the board of EEC Inc., even though he doesn't work for this firm. He also serves on the boards of several other companies. Landon is an Executive Director for Anderssen and a Non Executive Director for EEC.

An executive director has operational responsibilities in a firm but a non executive director does not have operational responsibilities in a firm but is involved in planning and policy formation which are strategic activities.

Operational refers to the daily running of a business.

8 0
3 years ago
Read 2 more answers
Xeon Inc., a maker of chocolate products, assigns its packaging and labeling to First Choice U.S.A., a firm that specializes in
Ray Of Light [21]

Answer:

c. outsourcing

Explanation:

Outsourcing -

It refers to the process of hiring another company , which is responsible for some external project or task , is referred to as outsourcing .

It can be a short term process of hiring , it may also require transferring the employees to another firm internally .

Hence , from the given scenario of the question ,

Hiring the packaging firm by another company , showcases the method of outsourcing .

5 0
3 years ago
Zach has decided to start his own photography studio. To purchase the necessary equipment, Zach withdrew $10,000 from his saving
Serga [27]

Answer:

Zach's annual opportunity cost of the financial capital(implicit + explicit)that has been invested in the business is $700.        

Explanation:

opportunity cost = 3%($10,000) +8%($5,000)

                           = $300 + $400

                           = $700

Therefore, Zach's annual opportunity cost of the financial capital(implicit + explicit)that has been invested in the business is $700.        

   

3 0
3 years ago
"In the DuPont system of​ analysis, the return on equity is equal to"​ ________. A. ​(net profit​ margin) times ​(total asset​ t
GalinKa [24]

Answer:

C. ​(return on total​ assets) times ​(financial leverage​ multiplier)

Explanation:

The formula of return on equity using the DuPont system is presented below:

ROE = Profit margin × Total assets turnover × Equity multiplier  

where,

Profit margin × Total asset turnover = Return on asset

The equity multiplier is

= Total assets ÷ shareholder equity

The total asset turnover equal to

= Sales ÷ Total assets

And, The profit margin equal to

= (Operating income ÷ sales) × 100

6 0
3 years ago
O'Neill, Incorporated income statement for the most recent month is given below. A proposal has been made that will lower variab
topjm [15]

Answer:

c. increase by $2,000

Explanation:

The computation of company net operating income is shown below:-

New amount for Store A variable expenses = Sales percentage × Store A sales

= 0.62 × $100,000

= $62,000

Change in net operating income = (Variable expenses of store A - New amount for Store A variable expenses) - Fixed expenses

= ($72,000 - $62,000) - $8,000

= $10,000 - $8,000

= $2,000 increase

4 0
3 years ago
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