Answer:
He could afford to spend $133,411 for the device now.
Explanation:
The maximum the surgeon could afford for the device is equal to the sum of present value of the lawsuit costs that he can avoid in year 2 and year 5 which is:
+ Year 2: 600,000 * %out-of-pocket cost for the law suit = 600,000 * 10% = $60,000;
+ Year 5: 1,350,000 * %out-of-pocket cost for the law suit = 1,350,000 * 10% = $135,000.
=> The amount he can afford for the device = 60,000 / 1.1^2 + 135,000 / 1.1^5 = $133,411.
So, the answer is $133,411.
Answer
The answer and procedures of the exercise are attached in the following images.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in 2 sheets with the formulas indications.
Answer: $535,500. $15,000 times .02 (2%) is 300. $15,000 plus 300 is $15,300. $15,300 times 35 is $535,500
Answer:
law of comparative advantage.
Explanation:
Nations will be able to produce a larger joint output and realize mutual gains when each specializes in the production of those items for which it is a low-opportunity cost producer and trades for those things that it could produce only at a high cost. This statement best describes the law of comparative advantage.
Comparative advantage can be defined as ability of a country or business entity to produce goods and services at a lower opportunity cost than others such as their trade partners. Hence, the most important benefit of the comparative advantage is that, it gives a country or business entity the ability to sell their finished goods and services at a lower price in comparison with its close competitors and consequently, resulting in a stronger sales margins.
Answer:
11.99%
Explanation:
For computing the estimation of cost of equity, first we have to determine the cost of equity based on CAPM which is shown below:
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 × (Market rate of return - Risk-free rate of return)
= 5% + 1.1 × 7%
= 5% + 7.7%
= 12.7%
The (Market rate of return - Risk-free rate of return) is also known as market risk premium and the same is shown in the computation part.
Now the cost of equity based on growth rate which is shown below:
= Current year dividend ÷ price + Growth rate
where,
The current dividend would be
= $1.40 + $1.40× 7%
= $1.40 + $0.098
= $1.498
The other things would remain the same
So, the cost of common equity would be
= $1.498 ÷ $35 + 7%
= 0.0428 + 0.07
= 11.28%
Now the best estimation would be
= (12.7% + 11.28%) ÷ 2
= 11.99%
