Answer:
a. Three (3).
b. Equity.
c. Liability.
d. Asset.
e. Account.
Explanation:
a. Balance sheet accounts are arranged into three general categories. These are asset, liability and equity.
b. Common Stock and Dividends are examples of equity accounts.
c. Accounts Payable and Note Payable are examples of liability accounts.
d. Accounts Receivable, Prepaid Accounts, Supplies, and Land are examples of asset accounts.
e. An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.
Answer:
1.
r market = 0.12 or 12%
2.
r stock = 0.12 or 12%
3.
r Stock = 0.169 or 16.9%
Explanation:
The required rate of return can be calculated using the CAPM or Capital asset pricing model equation. The formula for required rate of return under this model is,
r = rRF + Beta * rpM
Where,
- rRF is the risk free rate
- rpM is the risk premium on market
- r represents the required rate of return
1.
The beta of the market is always considered to be 1. Thus, the required rate of return on market would be,
r market = 0.05 + 1 * 0.07
r market = 0.12 or 12%
2.
For a stock whose beta is 1.0, the required rate of return would be same as that for market. So, the required rate of return for a stock with a beta of 1.0 is,
r Stock = 0.05 + 1 * 0.07
r Stock = 0.12 or 12%
3.
The required rate of return for a stock with a beta of 1.7 is,
r Stock = 0.05 + 1.7 * 0.07
r Stock = 0.169 or 16.9%
Answer:
Cost of equity = 14.43%
Explanation:
Weigheted Average cost of capital is computed using the formula below:
WACC = (Wd×Kd) + (We×Ke)
Kd= aftre tax cost of debt= 12%× (1-0.4)= 7.2%
Wd =Proportion of debt= 40%
We = proportion of equity = 60%
Ke= cost of equity.
let the cost of equity be "y"
WACC = 11.54
11.54 = (40%× 7.2%) + (60% × y)
0.1154 = 0.0288 + 0.6y
0.1154 - 0.0288 = 0.6y
y =(0.1154 - 0.0288)/0.6
y = 0.1443 × 100
y =14.43%
Cost of equity = 14.43%
Like toys r us it failed because they always had low costs and low profits from their toys.
Answer: Moral hazard
Explanation: As per economic principles, if an individual increases the exposure to risk when covered by insurance, moral hazard happens, particularly when an individual takes further risks just because someone carries the burden of all those consequences.
There can be a moral hazard at which one party's policies may modify to the disadvantage of someone else after a business transaction has occurred. Moral hazard may arise through a type of asymmetric information in which the threat-taking group to trade is more aware of its motives than the person bearing the risk's implications.
Thus, from the above we can conclude that the correct option is A .
