Answer:
6.20%
Explanation:
Calculation for the cost of the preferred stock
First step is to calculate the Annual Dividend Payment on Preferred Stock
Annual Dividend Payment on Preferred Stock = [7% * $80]
Annual Dividend Payment on Preferred Stock = $5.60
Now let calculate the Cost of Preferred Stock using this formula
Cost of Preferred Stock = [Preferred Stock dividend / Market Price of
Preferred Stock (1-Flotation cost)]
Let plug in the formula
Cost of Preferred Stock = [($80 * 7%) / $95(1-0.05)]
Cost of Preferred Stock = [$5.60 / $95 (0.95)]
Cost of Preferred Stock = [$5.60 / $90.25]
Cost of Preferred Stock = 0.0620*100
Cost of Preferred Stock = 6.20%
Therefore the cost of the preferred stock is 6.20%
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Answer: The correct answer is <u>".B. There is no beginning inventory.".</u>
Explanation:
The weighted average method produces the same cost of manufactured goods as the FIFO method (First in First out) when there is no beginning inventory because there are no units at the beginning that drag the cost.
Answer:
Risk Premium is 10%
Explanation:
Government treasuries represent risk free rate of return.
[tex]Risk Premium=R_{m}-R_{f}/tex] ,
where, [tex]R_{f} = Risk\ Free\ Rate\ Of\ Return/[tex]
[tex]R_{m} = Market\ Rate\ Of\ Return/[tex]
Risk Premium = 15 - 5 = 10%
Risk Premium is defined as return earned on market portfolio in excess of rate of return earned on risk free assets such as government treasury bonds.
So, Risk Premium refers to the compensation an investor expects to earn for assuming higher risk by investing in market portfolio instead of investing his money in risk free class of assets.
