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Romashka-Z-Leto [24]
3 years ago
5

Piedmont Hotels is an all-equity company. Its stock has a beta of 1.15. The market risk premium is 6.5 percent and the risk-free

rate is 2.3 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 1.5 percent to the project's discount rate. What should the firm set as the required rate of return for the project?
Business
1 answer:
Anit [1.1K]3 years ago
5 0

Answer:

Risk-free rate (Rf) = 2.3%

Beta (β) = 1.15

Market risk premium = 6.5%

ER = Rf + β(Market risk-premium)

ER = 2.3 + 1.15(6.5)

ER = 2.3 + 7.475

ER = 9.775%

The required rate of return for the project

= 9.775 + 1.5

= 11.275%

Explanation:

In this case, we need to calculate the expected return based on capital asset pricing model. Then, we will add the risk-adjustment of 1.5% to the expected return obtained from capital asset pricing model.

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Answer:

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d. It will provide the company with a competitive advantage.

Explanation:

The strategy of "providing free traffic updates and identifying the nearest parking spaces for its subscribers" will greatly benefit the company's customers.  These free services lower the cost for customers and provide an advantage for the company to reach out to more loyal subscribers for its portable navigation devices.  However, competitive advantages are not everlasting.  They can easily be copied by competitors.  This will level the advantage to zero.  This implies that Navi-devices must innovate to remain competitive.

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Every new customer at Five Elements Spa is asked to register his or her personal details, which includes the customer's age, pur
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Answer:

A. customer relationship management.

Explanation:

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6 0
3 years ago
The Pinetop Corporation issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2014. All remaining shares
lidiya [134]

Answer:

$12,000 and $6,000

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5 0
4 years ago
Suppose the federal government provides wheat farmers with a price floor above the market equilibrium price of wheat, creating a
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Answer:

D. Elimination of the price floor

Explanation:

A lowered priced goods facilitates increased quantity demanded but a decreased quantity of a specific goods/product supplied brings about reduction in surplus.

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On August 14, 2020, Washington declared a 2-for-1 stock split. At the time of declaration, shares were selling for $114/share. T
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Answer:

Follows are the description of the equity section change:

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